FinDev COVID-19 Update | 24 Sep - 07 Oct 2020

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Global

In the last two weeks, we’ve seen several interesting publications at the global level that examine a range of questions affecting microfinance institutions, SMEs, and fintechs.

• Microfinance: Drawing on the discussions from several workshops organized by CGAP in July, a new CGAP COVID-19 Briefing provides insights on how microfinance providers and their creditors can manage debt restructuring talks effectively; the timely flow of relevant information is one of the key aspects highlighted. Another CGAP COVID-19 Briefing offers five guiding principles for regulating MFIs in ways that mitigate the impacts of COVID-19. The Briefing builds on CGAP’s regulatory framework for MFIs, examines responses in India, Pakistan, Peru and Uganda, and offers additional examples from other countries. 
• Small and medium sized enterprises (SMEs): An IMF working paper estimates that without government support, nearly 9 percent of SMEs will fail due to COVID-19; this puts 3.1 percent of private sector jobs at risk. For banks lending to this segment, the estimated impact is moderate as the share of non-performing loans on bank balance sheets represent only 0.3 percent of banks’ assets.
• Fintech: Authors of a new CFI brief say that early-stage fintechs are operationally resilient and are adapting under COVID-19 by taking advantage of new opportunities to create partnerships with banks, governments, and NGOs. They are using digital channels to reach new clients, adapting their product offering, and diversifying their funding base. Accion released a new remote due diligence guide for fintech startups, venture capital firms and other investors, highlighting how providers’ approach to the due diligence process has recently changed and how technology is being used in the process. IFC published a new report highlighting how disruptive technologies are being used in emerging markets to respond to COVID-19; unsurprisingly, the report finds a large digital divide between countries of different income levels.

Asia

• As part of the Vietnamese government’s response to COVID-19, the State Bank of Vietnam has initiated a pilot scheme to develop a mobile money service for the country, prioritizing rural areas over major cities in order to enhance financial inclusion.
• IPA’s RECOVR survey in the Philippines found that 70 percent of respondents had trouble buying the usual amount of food for their family because of lower household income. 53 percent of poorer households did not have access to an account where they could make or receive payments, highlighting the importance of digitization for ongoing cash transfer assistance.
• The latest World Bank East Asia and Pacific Economic Update estimates that the number of people living in poverty in the region will increase by 38 million in 2020 due to COVID-19. This number includes 33 million who would have otherwise escaped poverty, and another 5 million who would be pushed back into poverty. 
• According to the Pakistani credit bureau Tasdeeq-Aequitas Information Services, in the first half of 2020, the Pakistan microfinance industry shrank by 0.7 percent in terms of gross loan portfolio and 4.9 percent in terms of active loans.

Africa

• A review of five surveys conducted in Nigeria unveils extensive economic damage in the country due to the COVID-19 restrictions. Despite using financial tools, households are struggling: 55 percent of respondents to a CFI survey said they have missed a loan payment. Another survey conducted by Nigeria’s National Bureau of Statistics shows that most loans taken since mid-March have been informal, with only 9 percent of Nigerian households obtaining loans from banks and MFIs. 
• The pandemic has been a catalyst for growth for telecommunications all across Africa, due to central banks easing regulations and governments sending COVID-19 relief packages via mobile money. Telco giants such as MTN and Orange added millions of new customers, recorded jumps in mobile money transactions and are launching new services ahead of time. 
• In Rwanda, the mobile money boom has been accompanied by a rise in fraud. To curb the threat, MTN Rwanda has revealed a new strategy introducing a USSD code into the cash withdrawal process. 
• According to an IFC study in Guinea, 85 percent of MSMEs experienced cash flow problems due to the pandemic; 80 percent of the respondents have not received government support.
• Mastercard, in partnership with Samsung, Airtel Africa and Asante Financial Services Group, launched a Pay-on-Demand payment platform. Piloting in Uganda, this new platform is expected to enhance and secure digital transactions. 

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

Latin America and the Caribbean

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

• According to data from the International Labour Organization, 34 million people have lost their jobs in LAC due to COVID-19. A new World Bank report offers three recommendations for stimulating job creation in the region: 1) boost productivity by investing in physical and digital infrastructure; 2) invest in human capital; and 3) rethink the social protection system.
•  In Colombia, one in ten microenterprises were forced to close due to the pandemic, according to an August survey conducted by Interactuar, a non-profit social development corporation. Among the main reasons cited for closing were running out of cash to finance operations and a 50 percent reduction in sales. Previous studies have shown that microenterprises in Argentina, Honduras and other countries in LAC closed for similar reasons.
• Out of every ten products sold by SMEs in Mexico, seven are now sold online, and five are sold through the digital platform Mercado Libre, according to a study conducted by the consulting firm Trendsity. This turn to digital sales is also seen in other countries in the region such as Peru, Colombia and Brazil.
• A new law in Peru establishes extraordinary provisions for loan moratoria for individuals and micro and small enterprises. The measures include rescheduling or temporarily freezing unpaid loans, reduced interest rates and credit forgiveness. Several countries in the region, including Ecuador, El Salvador, Bolivia and Mexico have taken similar measures.

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

Arab World

• The SANAD Fund for MSMEs has provided a $15 million loan to Banque du Caire for on-lending to micro, small, and medium enterprises, agricultural producers, and microfinance institutions in Egypt.  
• After postponing customer payments for six months last March, Bab Rizq Jameel Microfinance, part of Community Jameel, extended the program by three additional months until December, in support of efforts to mitigate the pandemic’s impact on Saudi citizens.
• Egypt’s Banque Misr plans to launch a standalone digital bank in the third quarter of 2021 that offers cheaper transactions and focuses on financial inclusion, as the coronavirus pandemic accelerates the government’s push for a cashless society.
• Income levels in Arab countries declined by 11 percent in the second quarter of 2020, “which is a significant decline compared to global levels,” Director-General of the International Labour Organisation Guy Ryder revealed during a high-level event on 30 Sep organized by the G20 Group and the International Monetary Fund.

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