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Discussion paper: Microfinance and HIV/AIDS

Joan Parker, Development Alternatives, Inc.

USAID Microenterprise Best Practices (MBP) Project

May 2000

SARPN acknowledges USAID as a source of this document:
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This Discussion Paper is written for microfinance practitioners worldwide. Its purpose is to heighten awareness of the impact of HIV/AIDS on microfinance institutions and the communities they serve. The paper does not propose recommendations on how MFIs can directly fight HIV/AIDS. It does, however, point out a range of options open to MFIs that decide to play a proactive role in HIV/AIDS-affected communities.


As HIV/AIDS continues to spread through Africa and elsewhere around the world, microfinance institutions (MFIs) operating in heavily HIV/AIDS-affected areas have discovered that – because of the disease – some of their operating principles and initial assumptions no longer hold. MFI client groups include both affected and infected individuals1, who face marked shifts in their personal and financial conditions. What are the effects of these changes on the microfinance institutions? Individual MFIs have reported the following changes:

  • HIV/AIDS-affected clients may not continue to borrow; and if they do continue to borrow, they may not do so in stepwise increments.
  • As the disease progresses, HIV/AIDS-affected clients are likely to need access to a wider range of financial services, especially safe and flexible savings.
  • Affected clients’ willingness to continue in programs may depend on their ability to stop borrowing for a period, or on having flexible access to accumulated savings.
  • MFI costs rise because staff are from affected households as well, leading to increased benefit costs, increased absenteeism, and increased staff deaths.
  • Portfolio quality may change due to increased delinquency, particularly if affected households have been encouraged to borrow beyond their ability to repay.
  • As client exits increase, the cost of maintaining or expanding the MFI’s client base rises.
So the question arises: What can MFIs do in the face of a potential, or growing, or established HIV/AIDS crisis? How can they strengthen their institutions so that they can continue to serve communities affected by HIV/AIDS, and how can they better serve their clients throughout? This is the topic of this discussion paper, and also of MBP’s2 on-going research initiative on microfinance and HIV/AIDS.

First, a cautionary note: It is not possible to know how many or which of an MFI’s clients are either infected or affected by HIV/AIDS. First, social taboos make it difficult to discuss the disease – and in most cases impossible to ask directly about a particular households or individual’s status. Second, the HIV/AIDS epidemic is a moving target, where the number of households affected and the type of effect on the household will both alter over time. Importantly, though, MFIs do not need to know the exact cause of client behaviors. The main point is for the MFI to remain aware of and sensitive to changes in client behaviors that may stem from the household’s experience with illness, care-taking, or death.

  1. Infected clients are those who carry the HIV/AIDS virus. Affected clients include not only the infected, but individuals who care for the sick, who have lost family members, who have lost income due to the illness or death of someone in the household, or who care for AIDS orphans.
  2. MBP is the 1996-2001USAID-funded Microenterprise Best Practices Project, managed by Development Alternatives, Inc. of Bethesda, Maryland.

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