Global Recession and Microfinance in Developing Countries: Threats and Opportunities

Abstract:     
The global recession which started in 2008 after the subprime crisis and the unprecedented default or rescue of many financial institutions has strongly affected the credibility of the international banking system, damaging also the real economy. Due to this joint crisis, the credit crunch is severely affecting the economy in Western globalized countries.

Developing countries, not fully integrated with international markets, seem less affected and local microfinance institutions might also allow for a further shelter against recession, even if foreign support to donor driven NGOs or not fully independent microfinance banks is slowing down and collection of international capital is harder and more expensive.

Intrinsic characteristics of microfinance, such as closeness to the borrowers, limited risk and exposure and little if any correlation with international markets have an anti-cyclical effect. In hard and confused times, it pays to be little, flexible and simple.

Number of Pages in PDF File: 34

Keywords: Microfinance, developing countries, recession, globalization, credit risk

JEL Classification: E32, F35, G01, G21

working papers series