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The Poor Risk Losing Access to Microloans When They’re Most Needed

Small loans can help people make a living, but lockdowns are making them harder to pay back.

Peter Manu sells his wares in Accra, Ghana.

Peter Manu sells his wares in Accra, Ghana.

Photographer: Nicholas Seun Adatsi for Bloomberg Businessweek

Peter Manu was a microlending success story. For a dozen years, by borrowing a few hundred dollars at a time, he’d been able to buy children’s shoes to sell in the central bus terminal in Accra, Ghana’s capital. With the proceeds, he paid his debts and had enough left over to provide for his two children. Then Accra’s schools closed in response to the coronavirus pandemic. Foot traffic in the bus terminal dried up, and so did Manu’s sales. He’s switched to handbags, but things are still difficult. “I can’t even take care of my kids,” he says. Nor can he make payments on his 2,000 cedis ($343) loan.

The microlending movement, which envisions small loans as a lever to raise millions of people out of poverty, has drawn broad support from governments and sizable investments from foreign financial institutions. The small loans can help the poor buy what they need to make a living, and they come from an array of lenders including specialized banks, local credit unions, and partnerships between banks and nongovernmental organizations. In the 15 years since Muhammad Yunus won the Nobel Peace Prize for his work on the concept, the number of microloan borrowers has ballooned to 140 million, with $124 billion in loans outstanding.