COVID-19 and the Future of Microfinance: Evidence and Insights from Pakistan

Oxford Review of Economic Policy, Forthcoming

NYU Wagner Research Paper Forthcoming

43 Pages Posted: 9 Jul 2020

See all articles by Kashif Malik

Kashif Malik

LUMS

Muhammad Meki

University of Oxford - Department of International Development

Jonathan Morduch

New York University (NYU) - Robert F. Wagner Graduate School of Public Service; New York University (NYU) - Department of Economics

Timothy Ogden

New York University (NYU) - Robert F. Wagner Graduate School of Public Service

Simon Quinn

University of Oxford

Farah Said

Centre for Research in Economics and Business, Lahore School of Economics

Date Written: April 24, 2020

Abstract

The COVID-19 pandemic threatens lives and livelihoods, and, with that, has created immediate challenges for institutions that serve affected communities. We focus on implications for local microfinance institutions in Pakistan, a country with a mature microfinance sector, serving a large number of households. The institutions serve populations poorly-served by traditional commercial banks, helping customers invest in microenterprises, save, and maintain liquidity. We report results from ‘rapid response’ phone surveys of about 1,000 microenterprise owners, a survey of about 200 microfinance loan officers, and interviews with regulators and senior representatives of microfinance institutions. We ran these surveys starting about a week after the country went into lockdown to prevent the spread of the novel coronavirus. We find that, on average, week-on-week sales and household income both fell by about 90%. Households’ primary immediate concern in early April became how to secure food. As a result, 70% of the sample of current microfinance borrowers reported that they could not repay their loans; loan officers anticipated a repayment rate of just 34% in April 2020. We build from the results to argue that COVID-19 represents a crisis for microfinance in low-income communities. It is also a chance to consider the future of microfinance, and we suggest insights for policy reform.

Suggested Citation

Malik, Kashif and Meki, Muhammad and Morduch, Jonathan and Ogden, Timothy and Quinn, Simon R. and Said, Farah, COVID-19 and the Future of Microfinance: Evidence and Insights from Pakistan (April 24, 2020). Oxford Review of Economic Policy, Forthcoming, NYU Wagner Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=3615077 or http://dx.doi.org/10.2139/ssrn.3615077

Kashif Malik

LUMS ( email )

D.H.A, Lahore Cantt
Lahore, Punjab 54792
Pakistan

HOME PAGE: http://https://mgshss.lums.edu.pk/lums_employee/3022

Muhammad Meki (Contact Author)

University of Oxford - Department of International Development ( email )

United Kingdom

Jonathan Morduch

New York University (NYU) - Robert F. Wagner Graduate School of Public Service ( email )

The Puck Building
295 Lafayette Street, Second Floor
New York, NY 10012
United States
(212) 998-7515 (Phone)

New York University (NYU) - Department of Economics ( email )

269 Mercer Street, 7th Floor
New York, NY 10011
United States

HOME PAGE: http://www.nyu.edu/projects/morduch

Timothy Ogden

New York University (NYU) - Robert F. Wagner Graduate School of Public Service ( email )

The Puck Building
295 Lafayette Street, Second Floor
New York, NY 10012
United States

Simon R. Quinn

University of Oxford ( email )

Farah Said

Centre for Research in Economics and Business, Lahore School of Economics ( email )

Intersection DHA VI and Burki
Burki
Lahore, Punjab 53200
Pakistan

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