This paper explores how MFIs can respond to help clients and communities in AIDS endemic areas. While examples are from sub-Saharan Africa, the strategies for MFI involvement in HIV/AIDS can be applied anywhere. Examples from FINCA/Uganda, FOCCAS/Uganda, and Opportunity International are given. It is important for MFIs to think strategically about the mix of products and services (insurance, credit, and savings) in their response to AIDS. MFIs can help to reduce HIV-related costs and preserve assets, wealth, and income. It is estimated that income is reduced 30–60 percent due to AIDS. MFIs can also supplement household incomes so that food supplies and children’s schooling can be maintained. Community-level coping mechanisms are essential in areas where AIDS is endemic. Because MFIs reach large numbers of borrowers and have a strong presence in communities, they can serve an important role in HIV/AIDS prevention and mitigation. Group repayment sessions (a common MFI strategy) can be used as a forum for education, information, care, and support. FOCCUS/Uganda provides 30–45-minute training sessions during their weekly meetings. FINCA/Uganda provides AIDS education, but uses an external organization.
The first step as MFIs plan their response to HIV/AIDS is to develop a financial landscape to understand the risks. After the landscaping is done, the appropriate mix of products and services can be designed. Some products/services that MFIs can design include loans with flexible terms, team loans, loans to youth, loans to those who care for orphans, reduced interest rate loans, insurance products (credit, life, health), funeral and emergency loan collateral, dedicated savings accounts, and fixed term deposits.
Examples of Opportunity International’s and FINCA/Uganda’s credit insurance programs to help reduce loan defaults are given. Credit insurance usually constitutes 2–5 percent of a loan. FINCA/Uganda provides health insurance at a cost of US $5.17 for a family of four for four months. Opportunity International provides life insurance at a cost of $1.50/month for 6 people and gives $167 in benefits per household. CARE International’s and Zambia Family Health Trust’s community-based orphan care program is described as a group-initiated loan program. Lastly, MFIs can also monitor drop-outs, absences, conduct exit interviews, and track arrears/defaults.

Length: 37 pages including an appendix
Type of file: PDF