Impact of the Global Financial Crisis on Microfinance

This paper examines the impact of the global financial crisis on microfinance and makes recommendations to help MFIs cope with it.The current global financial crisis has led to a significant decrease in the availability of international capital to the microfinance sector. This has adversely affected the sector's ability to achieve existing revenue and expansion targets. Standard & Poor's conducted a survey of MFIs, investments banks, microfinance investment funds, microfinance networks, microfinance industry associations and a rating agency to better understand and respond to the needs of the sector. Findings revealed that industry experts see this period as a positive development since slower growth will encourage MFIs to improve their operating discipline and enhance infrastructure to meet future expansion demands. Finally, the paper recommends that MFIs can minimize the impact of the global financial crisis by:

• Ensuring portfolio health despite low profits;
• Improving risk management processes;
• Working closely with international financial institutions, development agencies and other investors to minimize disruption of capital sources;
• Seeking to diversify and expand all sources of finance.