Microfinance more vital than ever

Editor:
As the global financial crisis lingers, its impact on the developing world is becoming more profound. Recently, the World Bank estimated that another 100 million people are expected to dip below the $2 per day wage threshold in 2009.
The impact of the global financial crisis on the microfinance sector is clear. On the one hand, the economic downturn has created new pressures. Microfinance organizations have had difficulty raising additional funds due to restricted liquidity in the capital markets. This will have a negative effect on the viability of funding in future. In addition, the financial crisis has also affected borrowers' ability to repay their microloans.
The top 150 microfinance institutions found that the 30-day loan delinquency rate has nearly tripled to three per cent. This rate remains quite low. The ongoing food crisis may be more of a culprit than the global financial crunch. The food crisis is forcing microcredit clients to spend a larger share of their income on food, making loan repayment more difficult.
While these new pressures are significant, microfinance has had a remarkable recovery rate. Microloans in the developing world continue to be paid back at relatively higher rates while we Western borrowers struggle with the economic collapse. Happily, growth continues in microfinance services for the poor. Microfinance organizations, which receive a significant portion of their funding from client savings deposits, are in better shape to withstand the current economic crisis.
The global economic crisis continues to affect the lives of those who had nothing to do with its creation. The current hardships faced by people who live on less than $2 a day calls for us to unite on their behalf, to offer support, and to continue to affirm their dignity as human beings. As unemployment rises in developing countries, the need for microfinance may be more vital than ever.