Financial Inclusion and Resilience: How BRAC's Microfinance Program Recovered from the West Africa Ebola Crisis

In July 2014, at the height of the Ebola virus disease outbreak, BRAC’s microfinance institutions (MFIs) in Liberia and Sierra Leone were confronted with two competing scenarios of how to move forward. Path one: revise operations in a challenging, volatile situation and press on, despite the threat to staff and clients’ health. Path two: pause operations, establish protocols to protect staff, clients and relationships, but risk long-term recovery and customer retention.

As the crisis escalated, there were several contributing factors that made it irresponsible—and therefore in BRAC’s eyes, impossible—to continue operating. The economic situation worsened and a state of emergency was declared in each country. Markets shut down and clients’ businesses struggled to stay afloat. Restrictions on gatherings and movement were put in place, making it challenging for credit officers to collect payments: Group meetings, the established platform for collections and disbursements, were not permitted. Furthermore, handling of cash and meeting in densely populated areas presented risk of transmission of the disease. When borders closed, and major airlines began cancelling flights, panic became even more widespread. Like many other international non-governmental organizations, BRAC sent its international staff in both countries home, including key managers of BRAC’s MFIs. At the time, though more than 90 percent of BRAC’s staff in both countries were nationals, the majority of senior management (area managers and higher) were international. This became a key factor in BRAC’s ability to continue operating throughout the crisis.

After weeks of adjusting its operations, including closing branches in the worst-hit areas, BRAC leadership ultimately decided to suspend microfinance operations in August 2014. While other local MFIs continued operating, BRAC’s MFIs closed for seven months, reopening in March 2015, when the number of new Ebola cases were declining. BRAC leadership expected that the long pause in operations, coupled with the severe economic downturn, would cause clients to default on their loans. BRAC was prepared to write off at least half of its portfolio in both countries. Remarkably, within the first few weeks of restarting collections, the repayment rates stood at well over 90 percent in Liberia and nearly 70 percent in Sierra Leone.

This case study traces the effect of the Ebola crisis on the operations of BRAC’s MFIs. It examines the MFIs’ reaction to the crisis, and the repercussions of the suspension on operational viability, revealing lessons on how to build institutional resilience, that apply both to BRAC and the broader microfinance community. The case study also examines the resilience of clients themselves measured by their ability to repay loans after collections restarted, with the hopes of gaining a deeper perspective into their strategies for coping during and after the crisis.

Development Challenges: Providing financial services for the poor in resource-constrained environments

The lack of access to formal financial services for the poor in low-income countries remains a key obstacle to inclusive economic development. It inhibits local market activity, threatens household resilience against shocks, hinders seasonal cash-flow, and heightens vulnerability to unscrupulous moneylenders and even fraud. The threat to resilience is observed most saliently in negative coping mechanisms such as liquidation of assets, reduction in food consumption, and postponing critical healthcare. West Africa in general, and Sierra Leone and Liberia in particular, lag far behind neighboring countries in the provision of financial services.

Delivery Challenges: Sustaining financial services for the poor during the Ebola crisis

At the apex of the Ebola crisis, BRAC leadership had to make a critical decision regarding operations. The crisis made clear that some curtailment in operations were needed. The only question was whether to scale back or pause services completely. Ultimately, concerns for the safety of staff and borrowers were too great to continue, especially as operating required close interaction with each other and the exchange of cash, which increased the risk of infection. BRAC faced a momentous challenge. Suspension threatened to sever client relationships and wipe out a large portion of the loan portfolios, thereby threatening BRAC’s solvency, and thus its ability to continue providing financial services to the poor in the long term. BRAC would have to manage the suspension without losing its clients, and eventually, restart operations in a way that accommodated their financial needs and struggles, while trying to rescue the sustainability of the microfinance companies.

Lessons Learned

Firstly, BRAC found that despite the limited history of microfinance in each country, clients in Liberia and Sierra Leone have cultivated an exceptionally high degree of credit discipline and recognition of the importance of credit worthiness. All clients interviewed for this case study communicated a sincere obligation to repay microfinance loans and made a clear distinction between their loans and other grants or benefits obtained from NGOs.

Secondly, upon restart, there was a high demand for new loans. For example, clients who had not worked in months, clients who lost their initial capital, and clients who had lost their businesses and were in debt, all demanded new capital to start generating income again. The high demand for new loans was a key driver of repayments because clients knew they were generally expected to have active and in-good-standing accounts in order to access fresh loans.

Third, firm collection practices, a legacy of the pre-Ebola period, were found to have played a role in loan recovery from a small minority of clients. This finding, which highlights the tension between encouraging clients to repay and the need to be sensitive to the impact of the disaster, compels even the best intentioned-MFIs to think extra carefully about what additional mechanisms must be put in place, post-crisis to ensure adequate protection for all of its clients.

Additional factors which promoted a successful recovery included the decision to continue to pay staff salaries throughout the hiatus, and the continuation of BRAC’s NGO services. Continuing to pay and engage staff enabled a smooth restart whereby Credit Officers had maintained relationships and communication with clients. Meanwhile, BRAC’s programs in health, education, and agriculture were active in communities across the country where clients lived, which helped to ease re-entry into the communities for the MFIs after the suspension.

Finally, this case study reveals the operational gaps that existed upon restart that, if managed or accounted for in the future, would strengthen the MFIs and better protect the economic position of its clients. For example, BRAC found that the BRAC MFIs in both countries could have been more effective at understanding and meeting clients’ needs if there had been better internal communications systems, a stronger cadre of national staff, and a more evolved and institutionalized post-crisis client protection plan in place beforehand.

This project sought to distill key lessons that would both explain the remarkable recovery of BRAC’s microfinance programs in West Africa following the Ebola Crisis in 2014, and offer instructive insight into how BRAC’s response could be improved further. The case study, which was produced by BRAC staff and supported by the Rockefeller Foundation, draws its findings primarily from key stakeholder interviews and focus group discussions with more than 80 respondents based in Liberia, Sierra Leone, and Bangladesh, and supported by secondary research that utilized documentation generated during the crisis.

The authors travelled to West Africa in April 2016 during which time they also collected stories of resilience and recovery from some of BRAC’s microfinance clients. You can read more about their stories by visiting the project microsite here.

About BRAC

BRAC is a development organization dedicated to alleviating poverty by empowering the poor. Founded in 1972 in the newly sovereign Bangladesh, BRAC evolved from a small relief operation into the world’s largest development organization (as measured in terms of the number of staff employed and the estimated number of people reached). BRAC has expansive programs in microfinance, education, health, human rights and legal empowerment, disaster preparedness, and humanitarian response.

BRAC’s microfinance programs provide financial services to more than five million poor and low-income clients. In Bangladesh, where BRAC has its largest presence, clients include women, farmers, small entrepreneurs, migrant workers, persons with disabilities, and youth. Its services range from microcredit and small enterprise loans to savings, micro-insurance, financial education, and access to mobile money.

In the six countries outside of Bangladesh where BRAC operates microfinance programs - Pakistan, Sierra Leone, Uganda, Liberia, Tanzania and Myanmar - it offers primarily women-focused microcredit and small enterprise loans. BRAC’s development programs work in tandem with its microfinance operations to provide women with livelihood support, financial awareness building, agriculture training for farmers, and empowerment programs for adolescent girls.