Paper
Financing Small, Medium and Micro Enterprises in Post-Conflict Situations Microfinance Opportunities in the Democratic Republic of the Congo
Can microfinance succeed in post conflict situations?
The author states that small, medium and micro enterprises (SMMEs) should be given particular attention in a post-conflict scenario for the following reasons:
- Reducing vulnerability of poor households;
- Providing quick response and helping jump-start the post-conflict economy.
Financing is a severe obstacle for SMMEs in developing countries. As per the paper, some of the reasons for this are:
- Political uncertainty;
- Macro-economic instability;
- Rule of law challenges;
- Rapid growth of the informal sector;
- Depleted human and physical infrastructure.
In addition, microfinance institutions (MFIs) in post conflict situations are adversely affected by the following factors:
- Population movements;
- Disruption in social capital;
- Lack of collateral and donor induced distortions.
Some of the major problems that the paper identifies in respect to donor coordination are:
- Confusion created between grants and credit;
- Continuous support to inefficient operations and promoting just temporary credit programs with no exit strategy.
Finally, the paper concludes with some factors for the success of MFIs in post conflict situations including:
- Concentrating operations in areas of relative stability with more safety nets;
- Avoiding areas with emergency grants;
- Creating partnerships between public and private sector players;
- Including donors for sharing costs in providing training;
- Separating pure financial services from social services, increasing visibility of performance of each MFI;
- Using ratings and attracting international microfinance specialists.
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