Impact of COVID on Micro Finance Institutions

Abstract

COVID-19 pandemic has affected acutely the financial system and created several challenges to the financial institutions in terms of their existence and raised a question about its survival in future. Micro finance is playing a vital role in enhancing the financial strength of the society. Micro finance institutions offer financial services in the form of loans for various purposes to support low-income people and weaker sections of the society who have less access in commercial banks. The COVID-19 pandemic has worsened the liquidity conditions of low-income people and small business owners and they are unable to gather funds for their personal and business needs due to widespread lockdowns. The external private finance is falling due to the reason that the borrowers are unable to repay their loans and it has started to create pressure on institutions which cannot repay their deposits on time due to its poor liquidity conditions. Hence, this paper has made an attempt to study the impact of COVID-19 pandemic on micro finance institutions and measures taken to combat the situation.