Microfinance Research in Conflict Environments: State of the Art and the Road Forward

This paper summarizes the major lessons emerging from research on microfinance in armed conflict settings to identify areas for further examination. The paper states that using the lessons learned as a foundation, further research could promote a better understanding of the appropriateness of microfinance for conflict mitigation and management.

The author lists lessons learnt from the experiences:

• Microfinance can be sustainable in conflict-afflicted environments;
• Products need to be adapted by means of in-depth market research;
• Qualified and experienced staff is necessary;
• Start-up and operating costs are high;
• Subsidies should not be allowed and repayments should be strictly dealt with.

The paper argues that there is a disparity between lessons and actual practices. It advocates improved guidance on microfinance in conflict areas, and suggests analytical tools to look at:

• The characteristics of conflict environments, impact of conflict on poverty levels, cultural sensitivities;
• The links between various types of crisis;
• Alternative financial systems.

The paper concludes by identifying areas for further research that include:

• Appropriateness of microfinance;
• Sequencing of microfinance and other services;
• Institutional choices;
• Targeting through specialization, especially of the women and the youth;
• Information on microfinance other than credit;
• Standardized versus tailored products;
• Cost of services;
• Clear guidelines for donors to identify effective microfinance partners.