[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"doc-detail-108850-en":3,"doc-seo-108850-105":30,"detail-sidebar-cat-0-en-105":91},{"code":4,"msg":5,"data":6},0,"success",{"doc_id":7,"user_id":8,"nickname":9,"user_avatar":10,"doc_module":4,"category_id":11,"category_name":12,"doc_title":13,"doc_description":14,"doc_content":15,"file_id":16,"file_url":17,"file_type":18,"file_size":19,"view_count":20,"is_deleted":4,"is_public":21,"is_downloadable":21,"audit_status":21,"page_count":22,"language":23,"language_code":24,"site_id":25,"html_lang":24,"table_of_contents":26,"faqs":27,"seo_title":13,"seo_description":14,"update_tm":28,"read_time":29},108850,1374391974468,"Eden","https://ap-avatar.wpscdn.com/davatar_29158cc5080c5b710cf443261637dec0",8,"Research & Report","How to Escape the Microfinance Lending Squeeze: Evidence from Ethiopia","Microfinance institutions worldwide faced uncertainty during the COVID-19 pandemic as portfolio quality weakened and capital buffers were depleted, leading to a sharp contraction in lending and increased risk for borrowers dependent on small-scale credit. In Ethiopia, microfinance borrowers—especially micro and small enterprises—experience a financing squeeze that erodes resilience and slows recovery. Using data from major MFIs, the brief documents impacts on institutions and borrowers and explains how liquidity constraints reduce new lending. It also outlines four evidence-based approaches to ease the squeeze and describes emergency interventions.","Public Disclosure Authorized Public Disclosure Authorized  \nAuthorized  \nEquitable Growth, Finance and Institutions Notes  \nPub lic Disclosure Author ized Pub lic Disclosure  \nHow to Escape the  \nMicrofinance Lending Squeeze:  \nEvidence from Ethiopia  \nSalman Alibhai, Mengistu Bessir, Toni Weis  \n© 2021 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433  \nTelephone: 202-473-1000; [Internet: www.worldbank.org](Internet: www.worldbank.org)[ ](Internet: www.worldbank.org)[Some rights reserved.](Some rights reserved.)  \nThis work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries.  \nNothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved.  \nRights and Permissions  \nThis work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO), [http://creativecommons.org/licenses/by/3.0/igo. Under](http://creativecommons.org/licenses/by/3.0/igo. Under) the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions:  \nAttribution—Please cite the work as follows: Alibhai, Salman; Bessir, Mengistu; Weis, Toni. 2021. How to Escape the Microfinance Lending Squeeze: Evidence from Ethiopia. EFI Note-Finance.  \nWashington, DC: World Bank.  \nTranslations—If you create a translation of this work, please add the following disclaimer along with the attribution: This translation was not created by The World Bank and should not be considered an official World Bank translation. The World Bank shall not be liable for any content or error in this translation.  \nAdaptations—If you create an adaptation of this work, please add the following disclaimer along with the attribution: This is an adaptation of an original work by The World Bank. Views and opinions expressed in the adaptation are the sole responsibility of the author or authors of the adaptation and are not endorsed by The World Bank.  \nThird-party content—The World Bank does not necessarily own each component of the content contained within the work. The World Bank therefore does not warrant that the use of any third-party-owned individual component or part contained in the work will not infringe on the rights of those third parties. The risk of claims resulting from such infringement rests solely with you. If you wish to reuse a component of the work, it is your responsibility to determine whether permission is needed for that reuse and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures, or images.  \nAll queries on rights and licenses should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; [e-mail: pubrights@worldbank.org](e-mail: pubrights@worldbank.org).  \n>>>  \nIntroduction  \nAcross the world, small-scale lenders—including microfinance institutions, community-based financial institutions, and other nonbank financial institutions—have grappled with uncertainty through the COVID-19 pandemic as portfolio quality deteriorated and capital buffers were drawn down. In many contexts, the resulting scenario is one in which lending has contracted substantially, posing threats to millions of borrowers who have historically relied on small-s","cbCaie06N3hzDVBq","https://ap.wps.com/l/cbCaie06N3hzDVBq","pdf",1117392,4,1,18,"English","en",105,"# Introduction\n## Context and impact of the COVID-19 pandemic\n## Ethiopia’s microfinance financing squeeze\n## Purpose and structure of the policy brief\n## Notes on emergency declaration and data collection","[{\"question\":\"Why did microfinance lending contract during the COVID-19 pandemic?\",\"answer\":\"Portfolio quality deteriorated and capital buffers were drawn down, creating uncertainty and reducing available financing. This led many lenders and microfinance institutions to tighten lending substantially.\"},{\"question\":\"What specific problem do Ethiopian microfinance borrowers face during the crisis?\",\"answer\":\"Borrowers, particularly micro and small enterprises, face a financing squeeze that undermines resilience. Even after normalization of business activity, MSE lending remains depressed due to constrained liquidity and reduced issuance of new loans.\"},{\"question\":\"How does the brief propose to escape the microfinance lending squeeze?\",\"answer\":\"It outlines four concrete ways to ease the squeeze, highlighting interventions in Ethiopia that provide emergency financing to both MFIs and the MSEs they serve. The goal is to support faster recovery toward pre-pandemic growth levels.\"}]",1784474412,45,{"code":4,"msg":31,"data":32},"ok",{"site_id":25,"language":24,"slug":33,"title":13,"keywords":34,"description":14,"schema_data":35,"social_meta":86,"head_meta":88,"extra_data":90,"updated_unix":28},"how-to-escape-the-microfinance-lending-squeeze-evidence-from-ethiopia","",{"@graph":36,"@context":85},[37,53,68],{"@type":38,"itemListElement":39},"BreadcrumbList",[40,44,48,51],{"item":41,"name":42,"@type":43,"position":21},"https://docshare.wps.com","Home","ListItem",{"item":45,"name":46,"@type":43,"position":47},"https://docshare.wps.com/document/","Document",2,{"item":49,"name":12,"@type":43,"position":50},"https://docshare.wps.com/document/research-report/",3,{"item":52,"name":13,"@type":43,"position":20},"https://docshare.wps.com/document/how-to-escape-the-microfinance-lending-squeeze-evidence-from-ethiopia/108850/",{"url":52,"name":13,"@type":54,"author":55,"headline":13,"publisher":57,"fileFormat":60,"inLanguage":24,"description":14,"dateModified":61,"datePublished":62,"encodingFormat":60,"isAccessibleForFree":63,"interactionStatistic":64},"DigitalDocument",{"name":9,"@type":56},"Person",{"url":41,"name":58,"@type":59},"DocShare","Organization","application/pdf","2026-07-30","2026-07-19",true,{"@type":65,"interactionType":66,"userInteractionCount":20},"InteractionCounter",{"@type":67},"ViewAction",{"@type":69,"mainEntity":70},"FAQPage",[71,77,81],{"name":72,"@type":73,"acceptedAnswer":74},"Why did microfinance lending contract during the COVID-19 pandemic?","Question",{"text":75,"@type":76},"Portfolio quality deteriorated and capital buffers were drawn down, creating uncertainty and reducing available financing. This led many lenders and microfinance institutions to tighten lending substantially.","Answer",{"name":78,"@type":73,"acceptedAnswer":79},"What specific problem do Ethiopian microfinance borrowers face during the crisis?",{"text":80,"@type":76},"Borrowers, particularly micro and small enterprises, face a financing squeeze that undermines resilience. Even after normalization of business activity, MSE lending remains depressed due to constrained liquidity and reduced issuance of new loans.",{"name":82,"@type":73,"acceptedAnswer":83},"How does the brief propose to escape the microfinance lending squeeze?",{"text":84,"@type":76},"It outlines four concrete ways to ease the squeeze, highlighting interventions in Ethiopia that provide emergency financing to both MFIs and the MSEs they serve. 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