MICROFINANCE PAPER WRAP-UP: “Impact of COVID-19 to MFIs in Indonesia: A Rapid Assessment,” published by Rise Research and Training

The authors of this paper conducted a “rapid assessment” of microfinance institutions (MFIs) that operate in ten provinces of Indonesia to: (1) identify key challenges that MFIs face due to the COVID-19 pandemic; and (2) define support mechanisms to sustain their business operations. The data is based on a survey of 52 staff members from seven banking institutions and 17 non-banking institutions. The survey was distributed during the last week of April 2020 and the first week of May 2020, after the number of COVID-19 cases in the country began to rise in mid-April.

The authors identified broad challenges, including poor morale among managers; borrower delinquency; and operational issues, such as lack of liquidity. Staff also face personal challenges, including concerns about remuneration cuts and contracting the virus. The institutions surveyed have addressed these issues by maintaining open communication, closely following regulatory measures and developing new operational policies. Most MFIs have implemented some form of social distancing, remote working arrangements and digital solutions for client interactions. The organizations also took measures such as rescheduling their customers’ loan repayments, reviewing their financial exposure and projecting various cashflow scenarios. Regarding assistance from the government, the MFIs expressed greatest interest in liquidity support, regulatory flexibility and timely information on the development of the pandemic.

The respondents stated that 81 percent of MFI personnel had “superior knowledge” of COVID-19, while only 69 percent of customers were believed to have this level of knowledge. The researchers also noted that some client enterprises have proven resilient, such as by diversifying and adapting their offerings to new market circumstances presented by the pandemic.

This is a summary of a paper by Caroline K Mangowal, Erlyn Shukmadewi and Tridadi Santoso; published by Rise Research and Training; May 2020; 11 pages; available at
https://www.findevgateway.org/sites/default/files/users/user331/200518%20COVID-19%20Indonesia%20MFI%20Rapid%20Assessment_RISE.pdf

Sources and Additional Resources

Rise Research and Training
https://riseindonesia.org/

More MicroCapital paper summaries
https://www.microcapital.org/?s=paper

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