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DONOR INFORMATION RESOURCE CENTRE
Helping to Improve Donor Effectiveness in Microfinance
www.microfinancegateway.org
Microfinance and HIV/AIDS
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December 4, 2003
Overview How does HIV/AIDS affect
poor households?
How can financial services best be used in communities grappling with HIV/AIDS?
How can financial institutions be effective in affected areas?
What can donors do to support an effective microfinance response to the HIV/AIDS crisis?
People with HIV/AIDS
Source: UNAIDS, AIDS Epidemic Update 2002.
• As of the end of 2002, an estimated 42 million adults and
children were living with HIV or AIDS
• Over 95 percent of them live in less developed countries
Sub-Saharan Africa
71%
South and Southeast Asia 14%
Latin America 4%
East Asia and the Pacific 3%
Eastern Europe/Central Asia 3%
Western Europe 1%
North America 2%
North Africa and Middle East 1%
Caribbean 1%
Australia and New Zealand <1%
A vicious cycle for poor people
Poverty deepens
Ability to protect against further economic losses decreases
How Does AIDS Affect Poor Households?
Vulnerability to disease increases
Why does income
decline in households
where persons
suffer from HIV/AIDS?
Lost income of a sick adult
Lost economic productivity of healthy adults who become caretakers
Dramatic increases in household expenses
How do households
handle economic
stress ?
• Liquidate savings
• Reduce food
consumption
• Borrow from formal
and informal sources
• Cut back on non-
essential expenses
• Sell assets, further
reducing the ability
to earn income in
future
Financial services alone cannot solve
the repercussions of HIV/AIDS
BUT
Access to a broad range
of financial services (especially savings) can
help households build a safety net to deal with
the impact of the disease
Help clients maintain or increase income
Provide clients with an opportunity to build savings which are secure, easy to liquidate quickly, and retain value
Reduce clients’ vulnerability to loss
Enable clients to avoid irreversible coping strategies that destroy future income earning (i.e., selling productive assets such as land or farming equipment)
How can financial services
help mitigate the
economic impact of
HIV/AIDS?
Who can use financial
services in regions
affected by HIV/AIDS?
Individuals who are HIV-positive, but still productive
Productive family members of HIV-positive individuals
Surviving spouses, children, or parents
Households unaffected by HIV/AIDS
Burial insurance
Emergency loans
Education trusts
for minors
Flexible savings
Loan insurance
Acceptance of younger
and older clients
What products and
policies are responsive to their needs?
How Can Financial Institutions Be Effective
in Heavily-Affected HIV/AIDS Areas?
Portfolio Management
Risk Management
Linkage Approach
MFIs can provide basic messages on HIV/AIDS prevention and care
MFIs can refer clients to specialized providers of health and insurance services
Linkage Approach
EXAMPLE: FINCA/Uganda negotiated an
insurance plan for its clients with Microcare, a
health-plan provider that offers coverage of acute
HIV/AIDS episodes
MFIs can operate successfully in communities affected by AIDS by maintaining a diverse portfolio
Explicitly targeting persons living with AIDS can:
– impair an MFI’s ability to achieve sustainability and scale
– overburden clients with debt they cannot manage
Portfolio Diversification
Financial institutions should prepare by :
Planning in advance how to respond to clients in crisis
Planning for reduced savings rates
Monitoring for higher dropout, absentee, and (possibly) default rates
Strengthening management information systems
Adjusting loan-loss provisioning
Risk Management
What can donors do
to support an
effective
microfinance
response to the
HIV/AIDS crisis?
Avoid explicit targeting
Support financial institutions
that are focused and specialized
Encourage
innovative
linkages and
strategic
partnerships
Facilitate the
exchange
and
dissemination
of lessons
learned
Avoid pushing MFIs to
launch operations in
markets specifically to
respond to the HIV/AIDS
crisis
Help MFIs already working
in heavily-affected regions
to manage the risks
Also support organizations
able to provide grants
instead of financial services
Avoid
Explicit
Targeting
Better understand the
prevalence of HIV/AIDS and
its impact on clients and
MFIs
Improve the ability of MFIs to
respond to the crisis (e.g.,
workshops on operational
planning)
Reduce the social stigma of
HIV/AIDS
Develop guidelines on non-
discriminatory HIV/AIDS
workplace policies
Facilitate the
Exchange and
Dissemination
of Lessons
Learned
Only sustainable, efficient
MFIs can provide
communities affected by
HIV/AIDS with permanent
access to financial
services
Most integrated programs
have poor results for
clients
Support
Financial
Institutions
That Are
Focused and
Specialized
Encourage
Linkages
and
Strategic
Alliances
Strategic alliances can provide opportunities for:
MFIs and HIV/AIDS programs to
cross-refer eligible clients
MFIs to invite HIV/AIDS NGOs to
provide information on prevention,
care, and support topics
HIV/AIDS groups to gain insights
from microfinance staff and clients on
income-earning topics
MFIs to reduce research costs for
lending innovations by using
information gained from HIV/AIDS
projects on clients’ economic coping
strategies
Donor
Good
Practice
Example
• In Zimbabwe, USAID funded training for staff from 15 MFIs on assessing the impact of HIV/AIDS on clients, staff, product demand, and financial results
• The training included a strategic planning exercise
• MFIs requested subsequent training on how to adapt financial products to HIV/AIDS settings
• After the training, seed funding to pilot test new or modified products was granted
Summary
Households affected by HIV/AIDS can use microfinance
services as one way to protect their economic resources
Launching a financial intervention specifically targeted at
persons with AIDS is not generally appropriate, since
financial services depend on the on-going ability of clients
to earn income
MFIs that operate in hard-hit regions can benefit by
planning for the institutional risk posed by HIV/AIDS
Donors can help by encouraging innovative linkages and
strategic partnerships between strong MFIs and
organizations providing HIV/AIDS-related services
Where to Get More Information
• Jill Donahue, Kamau Kabbucho, and Sylvia Osinde, HIV/AIDS—Responding to a Silent Crisis (Nairobi, Kenya: MicroSave-Africa, 2001).
• Joan Parker, MBP Microfinance and HIV/AIDS Discussion Paper (Washington, DC: USAID/MBP, 2000).
• Joan Parker, The MBP Reader on Microfinance and HIV/AIDS: First Steps in Speaking Out (Washington, DC: USAID/MBP, 2000).
• Joan Parker, Ira Singh, and Kelly Hattel, The Role of Microfinance in the Fight Against HIV/AIDS (Development Alternatives, Inc., report to the Joint United Nations Programme on HIV/AIDS, Washington, D.C., 2000).
Contact: Nataša Goronja
1818 H St., NW, Washington, DC 20433
Tel: 202-473-9594 Fax: 202-522-3744
E-mail: cgap@worldbank.org
Web: www.cgap.org