The COVID-19 pandemic and its impact on microfinance institutions in Indonesia

Abstract

The paper aims to analyse the impacts of the COVID-19 pandemic on microfinance institutions (MFIs) and identify mitigation and adaptation measures to cope with the situation. An online survey and focus group discussions were employed to capture how far the COVID-19 pandemic affects MFIs’ business. The results show that MFIs’ performance is negatively affected due to the COVID-19 crisis as their major customers, micro and small enterprises (MSEs), have experienced a contraction. MFIs have implemented several mitigation and adaptation measures to cope with the situation and future shocks. These results provide an overview of how far the COVID-19 crisis affects MFIs which can help the government design policies that can support MFIs and MSEs to survive. However, some issues related to methodology, such as the inability to capture complex and profound information, survey monitoring, and response rate, influenced the analysis so that the research may lack generalizability. Thus, a more holistic methodology is needed to investigate the impacts of the COVID-19 pandemic comprehensively.