Microfinance During and After Armed Conflict: Lessons from Angola, Cambodia, Mozambique and Rwanda

The paper presents the findings of qualitative research work done between June and August 2001, in Angola, Cambodia, Mozambique, and Rwanda which aimed to answer three questions:

• What environmental conditions have the greatest impact on microfinance?
• How do the poor manage household finances during and in post-conflict situations?
• What types of microfinance products are in demand during and in post-conflict situations?

These research questions were designed to test the following hypotheses:

• Microfinance products strengthen household coping mechanisms during and after conflict;
• Fulfilment of Doyle’s essential preconditions ensures a satisfactory environment for the supply and demand of microfinance products;
• Fulfilment of Doyle’s preferred conditions ensures a satisfactory environment for the supply and demand of sustainable microfinance;
• When choosing a microfinance product clients prefer those that are flexible, convenient, and give people easy access to their money.

Some of the findings mentioned in the report are:

• Few environmental factors precluded microfinance;
• Informal microfinance post-conflict depends upon mutual trust and the lender's knowledge of the borrower's livelihood activities;
• Semiformal microfinance depends upon adequate security in the locality;
• Trust or knowledge of borrowers' affairs and functioning markets is as important for informal microfinance as is security;
• Informal microfinance develops faster than semi-formal microfinance and can exist in areas of intense insecurity;
• Relief grants can have a significantly negative effect on microfinance for years after the handouts end;
• Demand for microfinance is directly related to coping mechanisms;
• Future interventions should create innovative lending and saving mechanisms and must achieve a balance between the costs of provision and attractiveness of the product to clients.