Microfinance role in conflict and post natural disaster areas
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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


Microfinance role in conflict and post natural disaster areas

Who we Areasare


Microfinance role in conflict and post natural disaster areas

  • Assumptions : Areasmany 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


Microfinance role in conflict and post natural disaster areas

  • 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)


Microfinance role in conflict and post natural disaster areas

Case industry…study 1 : Kyrgyzstan (2/3)

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


Microfinance role in conflict and post natural disaster areas

  • Lessons learned industry…

    • 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)


Microfinance role in conflict and post natural disaster areas

  • A war-torn country for the past 30 years … industry…

    • 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)


Microfinance role in conflict and post natural disaster areas

Case industry…study 2 : Afghanistan (2/3)

Source: Mix Market


Microfinance role in conflict and post natural disaster areas

  • Lessons learned industry…

    • 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)


Microfinance role in conflict and post natural disaster areas

  • A post-conflict country … industry…

    • 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)


Microfinance role in conflict and post natural disaster areas

Case study 3 : DRC (2/3)


Microfinance role in conflict and post natural disaster areas

  • Lessons learned industry…

    • 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)


Microfinance role in conflict and post natural disaster areas

  • Summary lessons learned : industry…

    • 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


Microfinance role in conflict and post natural disaster areas

Thank you ! industry…

Contact :

Michaël KNAUTE

CEO OXUS Development Network

michael.knaute@oxusnetwork.org

www.oxusnetwork.org

+ 33 6 74 61 36 42