Microfinance and HIV/AIDS. DONOR INFORMATION RESOURCE CENTRE Helping to Improve Donor Effectiveness in Microfinance

Transcription

1 Microfinance and HIV/AIDS DONOR INFORMATION RESOURCE CENTRE Helping to Improve Donor Effectiveness in Microfinance

2 PRESENTATION INSTRUCTIONS This is a DIRECT presentation designed for microfinance donors. These slides may be used or changed without permission. Attribution to CGAP/DIRECT is appreciated. Slides are accompanied by notes. To view notes, select from the PowerPoint menu: View/ Notes Page. Scroll to advance to next page. To print notes, select File/ Print/ Print what: Notes Pages. To print handouts of just slides (no notes), select File/ Print/ Print what: Handouts. Then enter the number of slides to print per page. For optimal printing on a black-and-white printer, select from the menu: File/ Print/ Pure Black and White. December 4, 2003

3 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?

4 People with HIV/AIDS Latin America 4% Caribbean 1% North Africa and Middle East 1% North America 2% Sub-Saharan Africa 71% Western Europe 1% Eastern Europe/Central Asia 3% East Asia and the Pacific 3% South and Southeast Asia 14% Australia and New Zealand <1% 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 Source: UNAIDS, AIDS Epidemic Update 2002.

5 How Does AIDS Affect Poor Households? Poverty deepens A vicious cycle for poor people Vulnerability to disease increases Ability to protect against further economic losses decreases

6 Lost income of a sick adult Why does income decline in households where persons suffer from HIV/AIDS? Lost economic productivity of healthy adults who become caretakers Dramatic increases in household expenses

7 How do households handle economic stress? Liquidate savings Reduce food consumption Borrow from formal and informal sources Cut back on nonessential expenses Sell assets, further reducing the ability to earn income in future

8 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

9 How can financial services help mitigate the economic impact of HIV/AIDS? 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)

10 Individuals who are HIV-positive, but still productive Who can use financial services in regions affected by HIV/AIDS? Productive family members of HIVpositive individuals Surviving spouses, children, or parents Households unaffected by HIV/AIDS

11 Flexible savings Education trusts for minors What products and policies are responsive to their needs? Emergency loans Burial insurance Loan insurance Acceptance of younger and older clients

12 How Can Financial Institutions Be Effective in Heavily-Affected HIV/AIDS Areas? Linkage Approach Portfolio Management Risk Management

13 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 EXAMPLE: FINCA/Uganda negotiated an insurance plan for its clients with Microcare, a health-plan provider that offers coverage of acute HIV/AIDS episodes

14 Portfolio Diversification 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

15 Risk Management 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

16 Avoid explicit targeting Facilitate the exchange and dissemination of lessons learned What can donors do to support an effective microfinance response to the HIV/AIDS crisis? Encourage innovative linkages and strategic partnerships Support financial institutions that are focused and specialized

17 Avoid Explicit Targeting 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

18 Facilitate the Exchange and Dissemination of Lessons Learned 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 nondiscriminatory HIV/AIDS workplace policies

19 Support Financial Institutions That Are Focused and Specialized 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

20 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

21 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

22 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

23 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 Tel: Fax: cgap@worldbank.org Web: