KATHMANDU, JULY 04

Microfinance was strongly tested at the start of the COVID-19 pandemic. Microfinance institutions, running a high-touch business and serving lower income clients severely impacted by the pandemic, were projected to potentially become extinct.

Microfinance institutions managed to not merely survive the crisis, they are now seen as more resilient and relevant than before.

What explains this? Looking back, the answers lie in how microfinance institutions responded to the pandemic and how they were supported by external factors.

At the onset of the pandemic, microfinance institutions reconnected with their clients, often with text messages on hygiene, and safety and social distancing reminders.

Microfinance institutions reached out to their clients even as microfinance lending and loan collections came to a standstill. These lenders avoided sending reminders on loan overdues and missed payments, instead focusing on the government-endorsed messages which helped to build trust.

A version of this article appears in the print on July 5 2021, of The Himalayan Times.