Microfinance: A Selective Introduction with Special Focus on HIV/AIDS

This paper discusses the effects of HIV/AIDS on microfinance institutions (MFIs) and strategies to be adopted by these institutions in combating this pandemic.

The paper provides a brief introduction of microfinance and highlights:

• Types of financial services routed through MFI;
• Different actors involved in microfinance activities;
• Critical factors for achieving financial sustainability and increasing outreach;
• Role of microfinance in achieving the millennium development goals.

The paper states the following two main approaches for providing additional services such as education and healthcare through MFI:

• Parallel approach;
• Integrated approach.

It then presents learnings based on the experiences of institutions working in areas affected by HIV/AIDS:

• Direct targeting of credit to HIV/AIDS infected is extremely risky and should be avoided;
• The microfinance system:
  • Represents a cost effective way for promoting services and information,
  • Reduces operational costs and risks for insurance provider;
• Strategic partnership with health insurance providers and organizations specialized in fighting HIV/AIDS is a win-win situation.

The paper elucidates the:

• Effect of HIV/AIDS on MFI staff;
• Financial risks associated with providing credit to a HIV infected person.

Finally, it highlights the strategies that should be adopted by MFIs working in areas affected with HIV/AIDS:

• Awareness creation among clients through partnership with HIV/AIDS institutions;
• Provision of new products such as insurance of outstanding balance against death of client;
• Seeking of support from donor agencies to introduce pilots on new products.