How to Escape the Microfinance Lending Squeeze : Evidence from Ethiopia

How to Escape the Microfinance Lending Squeeze : Evidence from Ethiopia

Across the world, small-scale lenders - including microfinance institutions (MFIs), community-based financial institutions, and other nonbank financial institutions - have grappled with uncertainty through the Coronavirus disease 2019 (COVID-19) pa...

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Bibliographic Details
Main Authors: Alibhai, Salman, Bessir, Mengistu, Weis, Toni
Format: Policy Note
Language:English
Published: World Bank, Washington, DC 2021
Subjects:
MICROFINANCE
SME FINANCE
SMALL AND MEDIUM-SIZED ENTERPRISES
CORONAVIRUS
COVID-19
PANDEMIC IMPACT
MICROFINANCE INSTITUTIONS
ACCESS TO FINANCE
GENDER INNOVATION LAB
WOMEN AND PRIVATE SECTOR DEVELOPMENT
AFRICA GENDER POLICY
Online Access:http://documents.worldbank.org/curated/en/267331623215965202/How-to-Escape-the-Microfinance-Lending-Squeeze-Evidence-from-Ethiopia
http://hdl.handle.net/10986/35758
id okr-10986-35758
recordtype oai_dc
spelling okr-10986-357582021-08-16T17:03:19Z How to Escape the Microfinance Lending Squeeze : Evidence from Ethiopia Alibhai, Salman Bessir, Mengistu Weis, Toni MICROFINANCE SME FINANCE SMALL AND MEDIUM-SIZED ENTERPRISES CORONAVIRUS COVID-19 PANDEMIC IMPACT MICROFINANCE INSTITUTIONS ACCESS TO FINANCE GENDER INNOVATION LAB WOMEN AND PRIVATE SECTOR DEVELOPMENT AFRICA GENDER POLICY Across the world, small-scale lenders - including microfinance institutions (MFIs), community-based financial institutions, and other nonbank financial institutions - have grappled with uncertainty through the Coronavirus disease 2019 (COVID-19) pandemic as portfolio quality deteriorated and capital buffers were drawn down. Ethiopia’s microfinance borrowers - particularly micro and small enterprises (MSEs) are currently facing a financing squeeze that undermines their resilience during the COVID-19 crisis and threatens to slow their recovery. Although Ethiopian MFIs entered the crisis in good financial health, they soon began to face deteriorating portfolios and a contraction in liquidity. Drawing on data collected from a panel of major MFIs, this policy brief provides an overview of the microfinance lending squeeze in Ethiopia and outlines ways to overcome it. Sections one and two looks at the impact of the COVID-19 pandemic on Ethiopian MFIs and on their borrowers, respectively, and show how MFIs responded to liquidity constraints by cutting off financing to MSEs. Sections three and four discuss possible ways out of the crisis, outlining four concrete ways to ease the squeeze and highlighting new interventions in Ethiopia that provide emergency financing to MFIs and the MSEs they serve. The aim of this brief is to shed light on the lending squeeze in Ethiopia, and to share lessons for post-pandemic microfinance lending globally. 2021-06-16T13:30:10Z 2021-06-16T13:30:10Z 2021-06-09 Policy Note http://documents.worldbank.org/curated/en/267331623215965202/How-to-Escape-the-Microfinance-Lending-Squeeze-Evidence-from-Ethiopia http://hdl.handle.net/10986/35758 English Equitable Growth, Finance and Institutions Notes; CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Economic & Sector Work Economic & Sector Work :: Policy Note Africa Africa Eastern and Southern (AFE) Ethiopia
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic MICROFINANCE
SME FINANCE
SMALL AND MEDIUM-SIZED ENTERPRISES
CORONAVIRUS
COVID-19
PANDEMIC IMPACT
MICROFINANCE INSTITUTIONS
ACCESS TO FINANCE
GENDER INNOVATION LAB
WOMEN AND PRIVATE SECTOR DEVELOPMENT
AFRICA GENDER POLICY
spellingShingle MICROFINANCE
SME FINANCE
SMALL AND MEDIUM-SIZED ENTERPRISES
CORONAVIRUS
COVID-19
PANDEMIC IMPACT
MICROFINANCE INSTITUTIONS
ACCESS TO FINANCE
GENDER INNOVATION LAB
WOMEN AND PRIVATE SECTOR DEVELOPMENT
AFRICA GENDER POLICY
Alibhai, Salman
Bessir, Mengistu
Weis, Toni
How to Escape the Microfinance Lending Squeeze : Evidence from Ethiopia
geographic_facet Africa
Africa Eastern and Southern (AFE)
Ethiopia
relation Equitable Growth, Finance and Institutions Notes;
description Across the world, small-scale lenders - including microfinance institutions (MFIs), community-based financial institutions, and other nonbank financial institutions - have grappled with uncertainty through the Coronavirus disease 2019 (COVID-19) pandemic as portfolio quality deteriorated and capital buffers were drawn down. Ethiopia’s microfinance borrowers - particularly micro and small enterprises (MSEs) are currently facing a financing squeeze that undermines their resilience during the COVID-19 crisis and threatens to slow their recovery. Although Ethiopian MFIs entered the crisis in good financial health, they soon began to face deteriorating portfolios and a contraction in liquidity. Drawing on data collected from a panel of major MFIs, this policy brief provides an overview of the microfinance lending squeeze in Ethiopia and outlines ways to overcome it. Sections one and two looks at the impact of the COVID-19 pandemic on Ethiopian MFIs and on their borrowers, respectively, and show how MFIs responded to liquidity constraints by cutting off financing to MSEs. Sections three and four discuss possible ways out of the crisis, outlining four concrete ways to ease the squeeze and highlighting new interventions in Ethiopia that provide emergency financing to MFIs and the MSEs they serve. The aim of this brief is to shed light on the lending squeeze in Ethiopia, and to share lessons for post-pandemic microfinance lending globally.
format Policy Note
author Alibhai, Salman
Bessir, Mengistu
Weis, Toni
author_facet Alibhai, Salman
Bessir, Mengistu
Weis, Toni
author_sort Alibhai, Salman
title How to Escape the Microfinance Lending Squeeze : Evidence from Ethiopia
title_short How to Escape the Microfinance Lending Squeeze : Evidence from Ethiopia
title_full How to Escape the Microfinance Lending Squeeze : Evidence from Ethiopia
title_fullStr How to Escape the Microfinance Lending Squeeze : Evidence from Ethiopia
title_full_unstemmed How to Escape the Microfinance Lending Squeeze : Evidence from Ethiopia
title_sort how to escape the microfinance lending squeeze : evidence from ethiopia
publisher World Bank, Washington, DC
publishDate 2021
url http://documents.worldbank.org/curated/en/267331623215965202/How-to-Escape-the-Microfinance-Lending-Squeeze-Evidence-from-Ethiopia
http://hdl.handle.net/10986/35758
_version_ 1764483715900112896

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