The impact of the pandemic is devastating the developing world and threatening decades of progress towards poverty reduction. In early October, the World Bank reported that COVID-19 is estimated to push an additional 88 million to 115 million people into extreme poverty this year, with the total rising to as many as 150 million by 2021, depending on the severity of the economic contraction. A knock-on impact of this is increased food insecurity with the World Food Programme (WFP) predicting those facing starvation will double to 260 million.
With government lockdowns, many of our clients who are small and micro-business owners in retail services, trade, and small-scale production, will be hardest hit by the pandemic’s effects. With many losing their ability to earn an income, there could be a loss of progress towards financial inclusion with millions of people finding themselves financially excluded, yet again, due to a poor repayment history and downgraded credit rating. Of significance, the impacts of COVID-19 will disproportionately affect women across multiple socio-economic areas including domestic violence, health access, food security and financial inclusion.
The Role of Microfinance Within Pandemic Recovery Efforts
Despite the negative impact of COVID-19 on microfinance institutions, it is clear that loans to the poor can play a critical role in the long- term recovery efforts. As the Economist pointed out “for microfinance lenders, COVID-19 is an existential threat yet, in the post-pandemic world, the world’s poor will need them more than ever.”
On the positive side, COVID-19 will significantly accelerate the digital financial inclusion needed to provide necessary and safer access to cash transfers and other contactless financial services. According to the World Bank and other leading development institutions, to limit the damage and build a strong recovery there needs to be “faster advances in digital connectivity, and a major expansion of cash safety nets for the poor by putting in place very targeted stimulus measures to help reignite growth. This includes efforts to maintain the private sector and get money directly to people so that we may see a quicker return to business creation after this pandemic has passed. During the mitigation period, countries should focus on sustaining economic activity with targeted support to provide liquidity to households.”
FINCA Canada is Adjusting Operations to Support Recovery Efforts
FINCA Canada is doing exactly this by continuing to support financial inclusion efforts while adapting to the challenges and changes to client needs posed by the pandemic. FINCA Canada’s Executive Director, Drew Boshell stated
The work of FINCA Canada is needed more than ever and as a result we are adapting the way we work to support recovery efforts. This includes shifting our financial literacy training online, working with our partners to restructure existing loans, increasing support of digital banking tools to allow for safe transactions and getting emergency loans to those in need with a focus on women who are disproportionately impacted. With support from our community, we can help millions rebuild a stronger, more resilient future.