Microfinance in Post-Conflict Situations: Towards Guiding Principles for Action

This paper is an initial attempt to develop a framework for implementing microfinance activities in post-conflict situations, given the pre and post-conflict environment. The decisions of stakeholders are guided by their understanding of the situation that shape their objectives and strategies in terms of timing, funding, coordination efforts, design, operational aspects and performance.

The decisions can be condensed into seven broad issues for learning lessons and formulating guidelines:

• When to intervene with microfinance in a post-conflict situation?
• Who to use with what objectives to implement microfinance activities in post-conflict situations?
• who to include as clientele?
• How to intervene with design and provision of appropriate products and services?
• How to create successful financial institutions in post-conflict countries?
• What innovations are in place for financial intermediation in post-conflict countries?
• When to exit?

The paper outlines a conceptual framework to identify key decision issues that need to be addressed by the stakeholders to facilitate financial intermediation through microfinance in post-conflict situations. The emerging lessons on the seven major areas outlined above are then summarized and the paper concludes with a broad set of guidelines for the stakeholders amongst which:

• Wherever possible, local capacity needs to be utilized to create mechanisms to provide financial services;
• Coordination among donors is essential;
• Programmemes should strive for inclusion, cohesion and participation of eligible members of the community rather than for strict targeting of a particular clientele;
• Market assessments are essential to identify demand and design appropriate products and services;
• Best practices are possible in post-conflict countries and should be the goal for MFOs to achieve;
• It may be difficult and may not be cost effective to evaluate young programmes operating in an immediate post-conflict stage;
• Evaluation of the programmes is essential to decide on the exit time for donors.