COVID-19 and the Future of Microfinance: Evidence and Insights from Pakistan

The COVID-19 pandemic threatens lives and livelihoods, and, with that, has created immediate challenges for institutions that serve affected communities We focus on implications for local microfinance institutions in Pakistan, a country with a mature microfinance sector, serving a large number of households The institutions serve populations poorly-served by traditional commercial banks, helping customers invest in microenterprises, save, and maintain liquidity We report results from �rapid response� phone surveys of about 1,000 microenterprise owners, a survey of about 200 microfinance loan officers, and interviews with regulators and senior representatives of microfinance institutions We ran these surveys starting about a week after the country went into lockdown to prevent the spread of the novel coronavirus We find that, on average, week-on-week sales and household income both fell by about 90% Households� primary immediate concern in early April became how to secure food As a result, 70% of the sample of current microfinance borrowers reported that they could not repay their loans;loan officers anticipated a repayment rate of just 34% in April 2020 We build from the results to argue that COVID-19 represents a crisis for microfinance in low-income communities It is also a chance to consider the future of microfinance, and we suggest insights for policy reform