How does Ebola impact microfinance in Guinea, Liberia, and Sierra Leone?

ebolaLast Thursday, the 30th Midi de la Microfinance organised by ADA had the topic “Ebola : What impact does the outbreak have on microfinance ? Concrete case with Crédit Rural de Guinée S.A.“.

These lunch time presentations and discussions take place in the Auditorium of the Banque de Luxembourg in Luxembourg and are a well-known even in the local microfinance community. Unfortunately I was out of the country, so I depend on secondary coverage by the Luxembourger Wort and Paperjam, and the documentation prepared by ADA. Unfortunately the very comprehensive report primarily provides information on how Ebola impacted the economy in Guinea, Liberia, and Sierra Leone. There is not a word about microfinance.

However, the economic impact is disastrous:

  • As of February 4 2015:   2975 Ebola cases, 1944 deaths (Guinea); 8745 Ebola cases, 3746 deaths (Liberia), 10 740 Ebola cases, 3276 deaths (Sierra Leone);
  • Restrictions on the movement of goods and people have threatened the food chains from production to market access and commerce. Most countries bordering Guinea,
    Liberia and Sierra Leone have closed their borders – with thousands losing access to their livelihoods and sources of income, including farmers who can no longer harvest their produce.
  • The limited supply of goods and services has started to take its toll on prices: the prices of oil, rice and potatoes doubled in Liberia, and the price of rice was marked up by at least 30 percent in Sierra Leone. In April alone, inflation rose from 6.39 to 7.8 percent
    in Sierra Leone. Since July and August is the planting season in the region, a food crisis in early 2015 is imminent in these countries and beyond.
  • As tourists cancel their bookings and movements within countries, local hotels and restaurants suffer a slump in their business, which results in lay-offs and slowdowns in economic activities of other sectors that depend on the hospitality sector.
  • The close-down in business operations not only results in losses in jobs and profits to companies, but also limited fiscal space of governments. The largest fiscal impact is felt in Liberia US$93,00 million (4,7% of GDP), followed by US$79,00 million in for Sierra Leone (1,8% of GDP) and US$120,00 million for Guinea (1,8% of GDP).

The impact of Ebola on household income

  • Bloomberg has projected the combined losses in the GDP of Guinea, Liberia and Sierra Leone at around USD13 billion.
  • Guinea, Liberia and Sierra Leone have consistently experienced an improved level of per capita income since 2001, averaging an annual growth rate of 4,33% in Guinea, 8,74% in Liberia and 13,50% in Sierra Leone. The Ebola outbreak , in just six months, has led to severe loss in household incomes – 35,13% (Liberia), -29,67% (Sierra Leone) and -12.73% (Guinea)

But to come back to our microfinance event: Invited had been Lamarana Sadio Diallo, Director General of the “Credit Rural de Guinée SA” to tell participants about the consequence of the Ebola virus on microfinance in the country. Credit Rural de Guinée SA is the largest MFI in Guinea (around 60% of the whole microfinance market) with 250 employees with 120 branches and around 300,000 clients. 60% of their clients live in the rural villages of the country and 40% of loans are going towards agriculture.

During the last year, the MFI registered 20,000 Ebola cases among its clients in Guinea, Liberia and Sierra Leone, of which 9,000 died of the disease. Only in Guinea, 3,132 cases have been reported of which around 60% died. There were also 4 employees of Credit Rural de Guinée SA which contracted Ebola.

The economic impact of the epidemic are disastrous for the economy of the country with a main hit on the agricultural sector. The high number of deaths immediately impacted agricultural production and demand for consumption. The reduction in economic growth from 4,5% to 0,5% (source: IMF) had a direct impact on tax revenue for the small country which came down €116million.

When the borders with neighboring countries were closed, many local markets were closed as well, agricultural trade slowed down. Many clients of Credit Rural de Guinée SA were not able to sell their products and did not have the money to repay their loans increasing the institution´s portfolio at risk levels. There were even periods when the institution stopped lending for a while to manage its risk. Credit Rural de Guinée SA suffers with a loss of €1,7 million.

Unfortunately, the MIX profiles of Credit Rural de Guinée SA and many other institutions in the affected countries are currently not available, i.e., one cannot observe other impacts the epidemic might have had on institutional capacity, i.e., high PAR levels, reducing client numbers (borrower and savers), reducing savings volume, etc. However, the presentation provides some information. Unfortunately, only in French.

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