The COVID-19 pandemic dramatically impaired the quality of life of economically disadvantaged populations around the world. This is the finding of a new report released by FINCA based on surveys of over 10,000 clients of microfinance institutions affiliated with the Social Performance Task Force.
Within the first weeks and months of nationwide lockdowns, many clients began to report food insecurity, and roughly half of them either reduced the number of daily meals or had to cut back on certain food items. Cross-country data showed that these effects were more pronounced in Africa and Latin America. While this experience undeniably represents the uniquely challenging circumstances of a pandemic, it also serves as a clear reminder of that the line between survival and crisis is fragile for people who depend on informal livelihoods.
The Use of Savings and Credit
The pandemic also demonstrated the significant role social networks continue to play in the lives of microfinance customers. Approximately 20 percent of survey respondents borrowed food and money from friends and family, which may seem surprisingly high given that these same community members were struggling with the effects of the pandemic themselves. After savings and help from social networks, microfinance institutions and banks were the next most important source for emergency cash. In rare cases, people turned to informal moneylenders and their high-interest loans, especially where financial inclusion had been in decline prior to the pandemic.
Lessons Learned for Future Crises
The pandemic has given new urgency to the demand for more flexible and accessible services. Convenience is now a necessity not a luxury. Microfinance clients clearly indicated that they want ready access to their money. They expressed interest in mobile and agency banking, extended branch operations and call-center services. In financial products, they want more liquidity in both savings and credit products, as well as flexible credit limits and savings withdrawals.
With their safety nets stretched, COVID-19 also left customers with an increased sense of their own insecurity, and a preference for services that are relational rather than transactional. As trusted partners, the survey found that microfinance institutions can play an important role in providing customers access to public assistance and health information. For this reason, FINCA is committed to providing sustainable services so that they can develop more robust livelihoods to survive the next crisis.
Download the full survey report for more information on survey findings from the eight participating organizations around the world, the impact the COVID-19 pandemic had on FINCA’s clients, and the next steps for both FINCA and the Social Performance Task Force.