In this blog, Ira Lieberman and Paul DiLeo offer a proposal for key principles and structures to help MFIs and their clients survive the pandemic-induced economic crisis. Do you agree with this proposal? What would you add or take away? Here's a quick summary:
1. First step - a standstill or moratorium on principal repayments.
2. Flexible responses which can be adjusted over time. Agree on the first workouts quickly and recognize the need for future iterations.
3. Strong top-down leadership and institutional capacity. We recommend a coordinating secretariat led by CGAP to work with a Steering Committee and to communicate with various sector institutions such as MIVs and MFIs seeking or receiving support.
4. Emergency liquidity funds need to be set up on a regional basis to start infusing liquidity into the sector and taking bad loans off of MFI balance sheets.
5. Reliable data is needed. Leaders in the sector should start gathering and sharing information on MFIs and the MIX will need to reposition its mission to report out on MFIs on a monthly basis to support fact-based decision making.
6. Efforts to save MFIs should focus on minimizing loss of services to clients. It will be necessary to segment who is supported and in what priority, for example: “Too big to fail” MFIs, Large and mid-size MFIs, “Impact First” MFIs which reach vulnerable populations.
7. Creditors and investors will need a heterogeneous mix of financial instruments.
8. Clients need to be protected throughout the process.