Responses of micro-finance institutions ( MFls)) to Hiv/Aids crisis in Kenya

Abstract

Microfinance institutions provide small loans and in some cases saving products to low-income people. Their client base is dominated by people who are characterized by poverty, low literacy levels and poor access to information. Because of their characteristics microfinance clients are more vulnerable to the aids pandemic and without any doubt the HIV/AIDS crisis has a major impact on the microfinance institutions both on the level of clients and staff.

The infection of clients or their family members leads to higher number of dropouts, increased absenteeism from group meeting and breakup of groups increasing the MFI's costs to maintain and expand the client base. The sick clients or clients that have to care for the sick have to divert funds and time from the business leading to reduced repayment capacity, higher default rates and difficulties to meet compulsory savings requirements. The reduced business activity also lowers the demand for repeat loans. Some clients have to deplete their savings, business income and assets in order to buy medicines and take care of family orphans. The high numbers of aids victims among clients forces MFls to write off outstanding loan balances increasing the overall costs.

The MFls staff and their families are also affected leading to high staff absenteeism due to frequent attendance of funerals, sickness, caring for sick. Staff expenditures rise because of increased staff turnover, funeral assistance for staff, medical costs and costs of recruitment and training of new staff.

In response to the effects of HIV/AIDs crises, some MFls have established HIV/AIDS policies; others have developed special loans funds for their clients who have been infected. Some MFls have develop new products which are flexible for their client, some few MFls allow family members to take over the loan of the diseased dient in order to continue the business. Many MFls have established loan insurance funds to offset loan balances for clients that passed away. Also, some MFls gives donations to children home which cater for HIV/AIDS orphans of whom some are HIV positive. There are also some few MFls that are involved in creating awareness on issues related to HIV/AIDS though this is not their core business.