[Fireside chat] The impact of Covid-19 on poor households

  • Johanna RYAN, VisionFund International
  • Anton SIMANOWITZ, Social Performance Task Force
  • Frank ALORNU, VisionFund Ghana
  • Nelly KPODO, VisionFund Ghana


Johanna RYAN opened the session by introducing the panellists and presenting the topic of this session. She explained that COVID-19 has had major impacts on financial service providers and its clients. The World Bank has adjusted its poverty estimates, and the number of extremely poor people have increased worldwide.

Ryan then gave the floor to Anton SIMANOWITZ, Director of Client Centricity for the Social Performance Task Force (SPTF), which has been supporting financial service providers to collect information on their clients so they can understand what happened to them during the pandemic. He shared the results of an extensive survey conducted by the SPTF, which revealed that the impact of the COVID-19 pandemic has been very different among different types of clients and contexts. For example, businesses in the service industry have seen most temporary suspension due to restrictions, whereas the agriculture industry faced transportation issues and received lower prices for their products. Simanowitz explained that women, the poor and youth have been affected most heavily by the crisis. He stressed that understanding these differences is important, also in determining how to move forward.

The survey also showed that the financial situation in many countries has worsened since the crisis, and whilst lockdowns may be ending, the clients of financial services are mostly not bouncing back. Vulnerability of clients has increased extensively. For many clients, the pandemic has resulted in a fall in income, erosion of savings and some sales of assets, which have a long-term impact. This demonstrates that there are still many challenges ahead.

Simanowitz added that measures taken by financial service providers to protect their clients have mostly been short term. He emphasised that flexibility is key to move out of this crisis, as clients need space and time to recover. To support financial service providers, increased flexibility is also needed from investors. Clients need recapitalisation and to restart businesses but, as they are more vulnerable, it is more difficult to qualify for credit. As the sector has not been affected uniformly, he urged that MFIs help clients find opportunities by, for example, helping them to diversify their income sources.

Next, Ryan asked Frank ALORNU, the CEO of VisionFund Ghana to share how he has seen the crisis develop over time. Alornu replied that as COVID-19 cases in Ghana skyrocketed in June 2020 and many businesses closed, every institution went into panic mode. Financial service providers were focusing on how to survive, not on how to serve clients. At VisionFund Ghana, they took on extra activities in the rural areas they work in, ensuring that people used personal protective equipment. They also helped businesses in rural areas by identifying other businesses that were flourishing and connecting those to clients that were not.

During the crisis, Alornu learned that, to run an institution, you need to have a recovery plan ready and tested. Board engagement has been key as well during the pandemic. This has helped the Institution to make quick decisions such as the cancellation of loan penalties. Leaders of institutions need to show the way out of the crisis and reassure their team that they will survive it. He also explained that staff need to be informed and involved in the process.

Nelly KPODO from VisionFund Ghana, with extensive experience in the field, explained how the MFI supported its clients during the pandemic. Most of the clients are women working in trade service and manufacturing in rural and semi-urban areas. Even before the crisis, VisionFund Ghana engaged strongly with clients, and had built trust relationships. These relationships helped them to support clients during the crisis, taking the situation of each client into consideration to identify individual challenges and propose solutions. Kpodo presented cases of a fish merchant and a seamstress who had lost their businesses but managed to find other employment. The MFI made new payment arrangements to ensure that both women could complete the repayments of their new loans.


Ryan opened the floor for questions from the audience, and shared a question from Nancy Thomas, who asked how the sector will address the fact that women are most severely impacted. Alornu explained that even before the crisis, women had a large role in the care for their children, which only increased when schools closed during the pandemic. As such, women needed to take care of the home, their children, and their businesses. Simanowitz reiterated that the financial sector should address this issue by offering flexibility. The sector needs to recognise the impact on different types of clients and that a different response is needed to help them. Financial service providers need to identify the problem, understand the nature of the challenge, and determine how best to respond. At the same time, policies, covenants, or expectations may block the flexibility that is needed. He explained that financial service providers may be inclined to put pressure on their clients to repay on time because they are pushed by investors to stick to covenants.

Sam Mendelson wondered whether there was any reliable evidence that microfinance clients were turning back to moneylenders, loan sharks and other high-interest credit sources. Alornu responded that VisionFund Ghana did indeed see individuals that lack access to finance turning to moneylenders. He explained that their normal options to lend money were limited due to the crisis, as MFIs are in survivor mode and relatives do not have resources themselves to lend. Simanowitz shared a silver lining, as people are now more cautious to borrow money because the crisis opened their eyes to its risks.

Nancy Thomas asked whether VisionFund Ghana has seen the need to develop new products in response to the crisis. Alornu replied that the MFI is working on a recovery loan to help clients recover from the impact of the pandemic. Simanowitz added that in the survey conducted he’s seen MFIs adapt its products to the shifting reality. For example, some organisations focus on financial education and business training to help clients adjust to the new situation, whereas others use recapitalisation loans.

He next turned the discussion towards digital channels, adding that many organisations are pushing forward in digital transition. Alornu warned that in working towards digital services, MFIs need to be careful not to put their clients at a disadvantage. VisionFund Ghana ensures that their clients are always able to use the services they develop.

To conclude the session, the panellists made several recommendations to the financial sector. Simanowitz emphasised that financial service providers need to adjust their risk-taking policies to the increased vulnerability of their clients, otherwise they risk excluding those who are most in need. Involvement from investors is crucial, since financial service providers cannot take on all the risk themselves, nor can they put all the risk on microfinance clients. Alornu added that they need to balance the risk of over-indebtedness of their clients with analysing credit risk in their recovery loans. The MFI has realised that their ability to continue to serve their clients also depends on the ability of their institution to survive the crisis. He concluded that financial service providers need constant engagement with their clients and other stakeholders.