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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. 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

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  1. Microfinance Role in Conflict and Post Natural Disaster Areas Michaël KNAUTE CEO OXUS Development Network

  2. Who we are

  3. 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

  4. 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)

  5. Case study 1 : Kyrgyzstan (2/3) Impact of the crisis on MFIs portfolio, source : AMFI, September 2010

  6. 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)

  7. 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)

  8. Case study 2 : Afghanistan (2/3) Source: Mix Market

  9. 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)

  10. 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)

  11. 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)

  12. 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)

  13. 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

  14. Thank you ! Contact : Michaël KNAUTE CEO OXUS Development Network michael.knaute@oxusnetwork.org www.oxusnetwork.org + 33 6 74 61 36 42

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