Financial Crisis: Lessons from Microfinance

Abstract

The paper explains why microfinance institutions require more rather than less funding during periods of financial crisis. After briefly describing the rapid expansion of microfinance as a distinct market segment, the paper explains the impact of a financial crisis in the economy on microfinance institutions based on experiences in Russia, Indonesia, Ecuador, Bolivia and Argentina. The analysis focuses on the case of Bolivia to probe further into the causes and lessons of the crisis. Other work in this field is also indicated. Finally, the paper offers recommendations for crisis management to microfinance institutions and draws general conclusions for the broader microfinance sector.

Keywords: Economic crisis, management, microcredit, microfinance, history, Latin America

JEL Classification: B29, D2, E3,G2, G3, M1