The provision of microfinance
in the wake of conflict

Paper prepared by: Jessica L. Jacobson
May 1999


The negative effects of conflict are well-known. In addition to the social and psychological trauma that war survivors sustain, many basic tenets of society crumble under the pressure. Communities may be torn apart, government structures corrupted or dissembled, and basic infrastructure vital to economic life and cross-regional transport rendered useless.

Effective delivery of micro-financial services is challenging under any circumstance. Institutions that desire deep outreach and financial sustainability however, encounter even more obstacles in post-conflict societies. Local institutions are shaky or non-existent, individuals lack collateral and are locked into defensive mechanisms, and paradigms for successful operations and best practices models are blown away with the gunshots. Many groups desire a jump-start to economic survival, although, their specific requirements vary widely. Refugees, returnees, the internally displaced, the recently demobilized, and the local populations all seek individual specialized services.

Along with the substantial risk that service providers endure, comes the potential for great impact on local and national development. Micro-finance institutions can effect positive change at the individual, the community, and the national level. For example, war survivors desperately want to fulfill their basic needs and to maintain their personal security. The opportunity to earn a steady income gives a family confidence that they can meet their needs on a regular basis, removing much of the fear and insecurity of wartime. By uniting a community in support of economic development and developing unique service delivery methods, institutions can ameliorate prejudices and local tensions. On a larger scale, institutions can demonstrate the positive effects of micro-finance to an attentive national audience. Successful examples in the early reconstruction phase can influence policymakers and legislators to support legislation enabling micro-financial service provision and can prevent restrictive regulations.

Uganda presents a clear example of a country that endured long-term and devastating conflict. Several types of micro-financial institutions are active in Uganda and struggle with the issues of providing services in a post-conflict environment. Examining their work sheds light upon the strategies that can be employed under difficult circumstances along with the potential problems and successes of such endeavors.

This paper will outline the issue of post-conflict micro-finance service provision and will discuss the specific characteristics that differentiate it from standard service delivery sites. Utilizing the case study of Uganda, the paper will examine the impact of conflict on a country. A focus on the various institutions active in Ugandan micro-financial services will analyze how practices were adapted to the unique environment. Various strategies will be outlined along with their implications, both for the successful provision of micro-finance and for the organization's sustainability . Finally, the Ugandan example will be incorporated into the larger context and analyzed in terms of future developments and possibilities in post-conflict micro-finance.

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