Microfinance and Famine: The Irish Loan Funds During the Great Famine

This paper analyzes the impact of external shocks such as famines on sustainability of microfinance organizations. It discusses the effect of the Great Famine in Ireland in the 1840s on Irish loan funds, and identifies factors that enabled the funds to survive.

The paper gives an overview of Irish loan funds, and narrates events that led to the Great Famine. The famine most directly affected loan fund clients, leading to overdue and bad debts. The paper empirically analyzes effects of the famine on fund survival using demographic data and financial statistics from the loan funds.

Findings of the study have several implications for contemporary MFIs on surviving external shocks. These include:

• Maintaining a strong capital ratio is crucial for increasing institutional robustness;
• Capital ratio, size of loan fund, managerial occupation and local literacy levels were significant predictors of fund survival;
• MFIs can be expected to perform better in regions with higher female literacy, suggesting that female literacy may be important for protection and support of social institutions.