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UNITED NATIONS CAPITAL DEVELOPMENT FUND Microfinance |
Issue 1 / January - February 2004 |
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News | Microfinance and HIV The Nexus of Microfinance and the HIV/AIDS epidemic: the 14th CGAP/UNCDF Donor Brief
HIV/AIDS affects adults in their most productive years and Africa stands as the only continent where the majority of those infected are women. This profile mirrors that of the typical microfinance client. Human capital, particularly in poor areas, is often depleted both at the household and community levels when income is lost due to sick workers or when productive adults must leave the workplace to become caregivers. For poor people, AIDS makes the effects of poverty more acute. People, especially parents, living with HIV/AIDS face tough choices. Financial institutions can function in areas with high HIV prevalence rates in ways that lessen some of the pain often associated with these choices. The financial demands of medical care and funerals can also contribute to the intense strain on a family in an area severely affected by HIV/AIDS. In some nations such as Uganda and Tanzania where at least one in five households are caring for orphans, according to UNAIDS, the impact on families is compounded. In the long term, these factors can affect national instability and economic recession. To prevent falling levels of income, investment and consumption, innovative ideas regarding the role of microfinance in responding to the HIV/AIDS crisis are beginning to emerge. For example, creative collaborations can be conducive to disseminating HIV/AIDS-related information and brokering strategic partnerships with separate projects that may provide links to healthcare, insurance or other fee-based plans. While MFI's should not be averse to operating where the AIDS crisis is most pronounced, the brief cautions against targeting people with HIV/AIDS as a single client group. As with any higher risk population, it is necessary to maintain a diverse portfolio to lessen the chance of a large number of default borrowers and to ensure operational sustainability. Access to microfinance may also contribute to the stemming of the spread of HIV/AIDS as poverty in areas of high prevalence may prove to be lethal if there are few to no economic opportunities. A recent Human Rights Watch (December 2003) report entitled, "Policy Paralysis: A Call for Action on HIV/AIDS-Related Human Rights Abuses Against Women and Girls in Africa" tells how women and girls in regions with unequal property and inheritance laws, though understanding the risks, may still resign themselves to engaging sex in exchange for money or food. A Kenyan girl is quoted in the report saying, "I may have to go into prostitution, and then I know I will get HIV and die; I would rather have a real business, but it is not easy." Access to microfinance can mitigate this desperation and provide additional choices so dangerous decisions that fuel the spread of HIV/AIDS are not made; it can also lessen these gender-based abuses particularly in sub-Saharan Africa where women bear the majority of AIDS cases. The CGAP-UNCDF brief acknowledges that a person with HIV/AIDS who is still able to participate in the workforce might encounter discrimination in the workplace or even when trying to access financial services. It is necessary to note that high levels of structural stigmatization do not only harm the health and well being of those living with AIDS but are also damaging to the welfare of the community and can create obstacles in communicating key prevention messages. Enshrined in the Declaration of Commitment on HIV/AIDS which emerged from the UN General Assembly Special Session in 2001 was the directive "to eliminate all forms of discrimination against people living with HIV/AIDS and vulnerable groups." Through strategic partnerships with AIDS service organizations, microfinance institutions can play a part in this effort. The full text of the brief is available at: http://www.cgap.org/docs/DonorBrief_14.pdf Other Recent Practice and Policy Briefs from CGAP Interest Rates: The brief warns against the use of subsidies to artificially lower interest rates when serving poor and low-income clients. While acknowledging that donor subsidies are necessary to build an institution's capacity and capital base, this practice can create institutional dependency, as subsidies cannot be provided forever, and can only benefit a small number of clients for a limited period of time. Instead, interest rates, often equal to or higher than commercial rates, must be able to cover the costs that allow an MFI to provide sustainable services. Poor people, like clients of commercial banks, value stability and convenience in seeking a lending source, thus experience has shown that they will pay interest rates that support sustainable access. Microfinance and Gender: Of the often-repeated statistic that 1.3 billion people in the world live in extreme poverty, 70% are estimated to be women. The brief suggests that the first step for donors to make sure women have access to microfinance services is to support MFI's committed to gender equality and gender analysis. With women often shouldering multiple roles both at the household and community levels, it is necessary to accept non-traditional collateral, eliminate loan use restrictions, and conduct outreach to make loan products available to illiterate or semi-illiterate women. To avoid the harmful effects of income fluctuations on the family, women should also be offered savings options that allow clients to put away small amounts in a safe setting. All briefs are available at: http://www.cgap.org/publications/donor_briefs.html |
