Microfinance and HIV/AIDS

This paper explores the experiences of MFIs and donors that support financial service provision in areas heavily affected by HIV/AIDS. The paper also elaborates on ways by which:

• Affected households can use financial services as a way to protect and build their economic resources;
• MFIs can help build effective links to specialized providers of health and insurance services.

Further, the paper describes three approaches by which MFIs can be effective in heavily affected HIV/AIDS areas:

• Linkage approach: MFIs can provide the basic messages on HIV/AIDS prevention and care. They can also refer clients to specialized providers of health and insurance services;
• Portfolio diversification: MFIs can operate successfully in communities seriously affected by HIV/AIDS by maintaining a diverse portfolio;
• Risk management: Strategies include advance planning on how to respond to clients in crisis; planning for reduced savings rates; monitoring for higher dropout, absenteeism; strengthening management information systems; adjusting loan-loss provisioning.

Finally, the paper suggests the role that donors could play to support an effective microfinance response to the HIV/AIDS crisis:

• Avoid pushing MFIs to launch operations in markets specifically to respond to the HIV/AIDS crisis;
• Facilitate the exchange and dissemination of lessons learned across the microfinance community;
• Support financial institutions that are focused and specialized;
• Encourage innovations in linkages and broker strategic partnerships between strong MFIs and organizations providing HIV/AIDS-related services.