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: While the global economic crisis has made the notion of decoupling seem absurd, there is one sector that is largely decoupled—namely, microfinance and the rural poor clients it serves. Those of us in the microfinance sector have known this all along, but hopefully the global economic crisis will make the mainstream financial world see this as well.

At first glance, the idea that microfinance is decoupled from the financial crisis may seem rather strange. But if you think about it, microfinance clients are less integrated into the formal economy. They don’t use or depend on imports; they rely instead on domestic goods and services. And even there, consumer spending is a low percentage of their overall expenditure. They are also not affected by currency fluctuations. On the other hand, the clients of conventional retail banks are exactly the opposite—thoroughly integrated into the global economy.

The other reason microfinance is decoupled is because micro-loans are primarily for income-generating activities. Loans also usually have a shorter maturity and the staff have much closer ties to borrowers, often meeting with them weekly. This enables practitioners to reduce borrower-specific risk as they can carefully monitor the repayment of micro-loans and adjust lending practices if necessary.

In addition, poor clients have tremendous resilience. Over the years, they have proven that they have the capacity to adapt to shifting economic currents; this is part of the survival skills that have enabled them to cope with drought, crop failure, other calamities and the general seasonal swings in their annual income over the years. The clients of mainstream banks have little ability to adapt in the manner in which poor clients have been able to do so.