Microfinance During and After Armed Conflict: Lessons from Angola, Cambodia, Mozambique and Rwanda

Examining environmental conditions, coping mechanisms and microfinance demand after conflict
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The paper presents the findings of qualitative research work done between June and August 2001, in Angola, Cambodia, Mozambique, and Rwanda which aimed to answer three questions:

  • What environmental conditions have the greatest impact on microfinance?
  • How do the poor manage household finances during and in post-conflict situations?
  • What types of microfinance products are in demand during and in post-conflict situations?

These research questions were designed to test the following hypotheses:

  • Microfinance products strengthen household coping mechanisms during and after conflict;
  • Fulfilment of Doyle’s essential preconditions ensures a satisfactory environment for the supply and demand of microfinance products;
  • Fulfilment of Doyle’s preferred conditions ensures a satisfactory environment for the supply and demand of sustainable microfinance;
  • When choosing a microfinance product clients prefer those that are flexible, convenient, and give people easy access to their money.

Some of the findings mentioned in the report are:

  • Few environmental factors precluded microfinance;
  • Informal microfinance post-conflict depends upon mutual trust and the lender's knowledge of the borrower's livelihood activities;
  • Semiformal microfinance depends upon adequate security in the locality;
  • Trust or knowledge of borrowers' affairs and functioning markets is as important for informal microfinance as is security;
  • Informal microfinance develops faster than semi-formal microfinance and can exist in areas of intense insecurity;
  • Relief grants can have a significantly negative effect on microfinance for years after the handouts end;
  • Demand for microfinance is directly related to coping mechanisms;
  • Future interventions should create innovative lending and saving mechanisms and must achieve a balance between the costs of provision and attractiveness of the product to clients.