Paper
Systemic Risk and HIV/AIDS in Microfinance
How to deal with the AIDS crisis?
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14 pages
This paper presents the ill-effects of HIV-AIDS on MFIs:
- Diminished portfolio quality due to decreased repayment capacity of clients and diversion of household incomes for treatment;
- Adverse impact on staff, leading to absenteeism, loss of productivity and morale;
- Increased employee turnover and increased costs of retraining;
- Increased risk of fraud and increased control costs.
The paper identifies the following strategies for the donor community:
- Keeping expectations low on ability of microfinance to help those affected by HIV/AIDS;
- Not portraying microfinance as a solution to HIV/AIDS;
- Having realistic assumptions about cost structures in AIDS-affected countries;
- Rewarding MFIs that monitor impact of HIV/AIDS on portfolio;
- Supporting cautious experimentation.
The paper also identifies some strategies for the MFIs operating in AIDS afflicted environment:
- Acknowledge and measure HIV/AIDS risks;
- Refine and align products;
- Risk-proof operations;
- Refer clients to AIDS related services;
- Have sensitive workplace policies.
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