FinDev COVID-19 Update | 30 Jul - 12 Aug 2020

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Global

• New results from the CGAP Global Pulse Survey of Microfinance Institutions shows four key ways in which MFIs are responding to COVID-19: 1) offering leniency to clients; 2) cutting back on their lending; 3) making flexible staff arrangements; and 4) scaling up remote channels. 

• A survey of small business owners and customers in seven high-income countries and Brazil found that 70 percent of consumers “have used a new shopping or payment method for the first time since the start of COVID-19”; nearly half of consumers would not shop at a store that doesn’t offer a contactless payment option.

• Government relief efforts in response to COVID-19 often exclude informal workers and women. A new CGAP COVID-19 Briefing offers insights on how to identify and reach informal workers in developing countries. Given that women face a higher risk of exclusion from government programs, a new paper suggests making women the default recipient of cash transfer programs and distributing mobile phones to women who don’t own one.
• According to a new CFI Brief, governments must consider that blanket moratoria for all institutions may not always be appropriate; based on early experience in Egypt, partial moratorium to MFI clients can be successful and ease the impact on the MFIs. 
• As economies reopen, borrowers face a range of risks related to credit; among others, three possible risk scenarios include: 1) over-indebtedness among current borrowers; 2) inability of households and small businesses to obtain loans; 3) aggressive and reckless lending.

Asia

• About one-third of farm households in Punjab, Pakistan reported loss of earnings due to COVID-19 and 22 percent had family members return home from urban areas.
• Early-stage fintechs in Indonesia are cutting expenses by 30 to 60 percent to extend their life, according to a report by MSC which assesses the impact of the COVID-19 pandemic on Indonesian fintechs. Most early-stage fintechs surveyed had enough funds to survive only 3 to 6 months.
• SMEs in the region are receiving financial support through increased loan facilities. IFC provided $140 million in loans to two Vietnamese banks to support SMEs impacted by the pandemic. In Cambodia, Small and Medium Enterprise Bank (SME Bank) of Cambodia and Agricultural and Rural Development Bank of Cambodia have loaned out over $63 million so far to SMEs, as part of a $100 million emergency loan project financed by the SME Bank and 32 other financial service providers.
• According to a new ADB report, remittances to Asia and the Pacific are expected to decline by between $31 and $54 billion in 2020. With remittance-dependent households at risk of falling into poverty, ADB encourages countries to extend temporary protections for stranded and returned migrants as well as social protection for the poor, among other policy measures.

Africa

Some of the articles and knowledge resources referenced in this section are in French.

• According to IPA’s RECOVR survey, almost 70 percent of respondents in Sierra Leone reported that they were working fewer hours than before the pandemic; “about 90 percent, said they had not received economic assistance from the government since the pandemic began” and 60 percent had used up their savings to pay for food and other expenses.
• COVID-19 has exacerbated food insecurity for the most vulnerable people in the Sahel region of Africa. Given their large networks, financial institutions, especially MFIs and post offices, can play an important role in distribution of safety net payments.
• Airtel Africa and multinational bank Standard Chartered entered a partnership aimed at boosting financial services in Africa; users will be able to make online deposits and withdrawals and mobile banking transfers will be available across four key markets in the region.

For more on Africa, check out the latest Portail FinDev Weekly Update in French.

Latin America and the Caribbean

The articles and knowledge resources referenced in this section are in Spanish.

• Peru announced new rules for consumer protection requiring financial service providers to offer tailored loan repayment options and at least one credit card without membership fees.
• The Honduran Microfinance Network says that MFIs in the country have the capacity to lend up to $445 million, but 55 percent of MSMEs remain closed due to the COVID-19 lockdown.
• Despite the growth in digital payments during COVID-19, eight out of ten Argentines consider cash to be fundamental for their daily life and for reactivating the economy. 85 percent believe it is not possible to replace it with digital tools.
• Despite negative forecasts, remittances to Mexico increased 10.5 percent in the first six months of the year. Many Mexican immigrants in the U.S. availed of the country’s fiscal and unemployment relief packages upon losing their jobs, which may help explain the most recent growth in remittances. Inflows to El Salvador, Guatemala, Nicaragua and Honduras also grew in June.
• In Ecuador, eight out of ten workers are now either in the informal sector or unemployed.

For more on LAC, check out the latest Portal FinDev Weekly Update in Spanish.

Arab World

• The SANAD Fund for MSME has provided a $4 million loan to Vitas Palestine Microfinance Company. The investment will be used to expand financing for local micro and small enterprises and low-income households in an environment hit hard by COVID-19.
• The World Bank has extended a $300 million four-year program for two more years and increased its financing by $100 million to support the “Government of Jordan in providing Syrians with more flexible work permits to reduce informality and ensure they are covered under the labor law.” Jordan’s ambitious efforts to improve social security coverage led to an increased number of e-wallets from 0.62 million to 1 million in the last six months. 
• Almost three in four consumers (72 percent) in the United Arab Emirates would avoid shopping at stores that don’t offer contactless payment options; 90 percent have made changes to the way they pay for items due to COVID-19, according to survey by Visa.

For more on the Arab world and resources in Arabic, check out the latest FinDev Weekly Update in Arabic.