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Microfinance Role in Conflict and Post Natural Disaster Areas. Michaël KNAUTE CEO OXUS Development Network. Who we are. Assumptions : many cases of successful MFIs in crisis-affected areas & microfinance recognized as a key economic recovery/development tool

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microfinance role in conflict and post natural disaster areas

Microfinance Role in Conflict and Post Natural Disaster Areas

Michaël KNAUTE

CEO OXUS Development Network

slide3

Assumptions : many cases of successful MFIs in crisis-affected areas & microfinance recognized as a key economic recovery/development tool

  • But key success factors/lessons learned
  • Presentation :3 case studies about impact of political crisis/shocks in various contexts ; natural disasters covered by Kashf Foundation
  • 3 countries :
    • Kyrgyzstan, 2010 : mature but affected by a sudden crisis
    • Afghanistan, 2004-2010 : chronic conflict/crisis
    • DRC, 2006-2010 : post-conflict

3 case studies

slide4

A strong, commercial and fast-growing microfinance industry…

    • Positive economic trend and investment climate, strong actors, high involvement from commercial investors, strong regulatory environment, mature market
  • … affected by a sudden political/ethnic crisis in 2010
    • Coup and new government in April 2010
    • “Pogrom” in June 2010 targeting mostly Uzbek micro-entrepreneurs in Southern Kyrgyzstan

Case study 1 : Kyrgyzstan (1/3)

slide5
Case study 1 : Kyrgyzstan (2/3)

Impact of the crisis on MFIs portfolio, source : AMFI, September 2010

slide6

Lessons learned

    • Resilience of MFIs and clients to political crisis
    • Importance of having strong actors (size, procedures, advocacy )
    • Dialogue and collaboration/coordination between donors, NGOs and MFIs
    • Dialogue between MFIs and affected clients (monitoring, image, restructuring, grants, …)
    • Partnerships and creativity (e.g. co-projects Kompanion/Mercy Corps, ACTED/OXUS, …) to support the most-affected

Case study 1 : Kyrgyzstan (3/3)

slide7

A war-torn country for the past 30 years …

    • No state, no regulatory framework, very high insecurity and instability, no banking/microfinance sector until 2003
  • … but microfinance sector launched from scratch in 2004, mainly funded by a WB-led apex institution
    • Creation of MISFA in 2003
    • High-pressure for growth : from 0 in 2003 to 100 mUSD industry in 2008

Case study 2 : Afghanistan (1/3)

slide9

Lessons learned

    • Importance of professionalization of MFIs and risk-management before focusing on growth
    • Difficult to recruit top-managers
    • Necessary involvement of publics donors and DFIs to support birth/strengthening of the sector/delayed profitability
    • Get deep field knowledge (cultural, political risks) and focus on safer areas
    • Still possible to develop an ambitious/commercial microfinance industry in such a context
    • Growth opportunities offered by high demand/low offer

Case study 2 : Afghanistan (3/3)

slide10

A post-conflict country …

    • No state, no regulatory framework, high insecurity and instability, no banking/microfinance sector until 2005
    • Gradual stabilization and post-conflict situation since 2006
  • … but no major microfinance initiative/strategy launched in the meantime
    • Total MFIs portfolio in 2010 : 60 mUSD ; 2 big MFIs only
    • Lack of ambition of donors/NGOs, still very much in an emergency approach
    • Or weak decisions: let’s build local capacities and that’s it

Case study 3 : DRC (1/3)

slide11

ACTED project in Kivu (from 2006 to 2008)

    • OLB : 200,000 USD in 18 months
    • Targeting marginalized communities
    • NGO approach : financial + non-financial services

Case study 3 : DRC (2/3)

slide12

Lessons learned

    • Some similar to Afghanistan (resilience, deep knowledge, risk-management and portfolio quality, capacity building, etc …)
    • Public donors/government still uncomfortable with microfinance in post-conflict strategies
    • Gap may be more important with marginalized/rural communities (lack of market, logistical issues, capacity building)
    • Smaller loans, shorter terms, bigger groups, high credit files rejection
    • Reputation is not reality
    • Needs to welcome international actors who can bring professionalization to the sector and leverage donor funding

Case study 3 : DRC (3/3)

slide13

Summary lessons learned :

    • Big variety of crisis/situations
    • MFIs can prosper during chronic conflicts or resist to sudden crisis
    • Importance of adapting to the context (slow growth hence delayed profitability, field knowledge, capacity building, products)
    • Gap between mainstream clients and marginalized communities may be higher than other contexts
    • Importance of partnerships/dialogue with donors/DFIs/NGOs for strategy definition/funding/quick response
    • Importance of having strong/established MFIs to withstand shock and bring professional approach

Conclusion

slide14

Thank you !

Contact :

Michaël KNAUTE

CEO OXUS Development Network

[email protected]

www.oxusnetwork.org

+ 33 6 74 61 36 42

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