Sustainability of Microfinance Institutions in Financial Crisis

This paper discusses MFIs' sustainability, and examines the impact of the global financial crisis on MFIs in different regions. The paper states that microfinance in Eastern Europe and Central Asia is most adversely affected. Findings include:

• MFIs reported deterioration of loan portfolio quality with further decrease in East Asia and the Pacific;
• Highly leveraged microfinance market was exposed to troubles of less liquidity and refinancing risk in Eastern Europe & Central Asia;
• Microclients were hardest affected in Latin America & Caribbean, with lowered repayment capacity, business activity and volume of remittances;
• MFIs in Middle East and North Africa were less affected due to highly regulated financial markets;
• MFIs in South Asia experienced low impact due to some proactive government measures;
• MFIs in Sub-Saharan Africa faced a shortage in demand for microentrepreneurs' products and a decrease in savings.

MFIs are more connected to the international financial market than before, and are likely to feel the impact of the crisis. The paper states that the main test of resilience of the microfinance system will come at the end of the financial crisis.