Horizons | Research Summary | Microfinance and Households Coping with HIV/AIDS in Zimbabwe: An Exploratory Study

RESEARCH SUMMARY

June 2002

Microfinance and Households Coping with HIV/AIDS in Zimbabwe: An Exploratory Study

Key Findings (continued)

Forty percent of microentrepreneurs’ households may be affected by HIV/AIDS. In 1999, 40 percent of both client and non-client households were possibly affected by HIV/AIDS, according to one or more of the study’s proxy indicators. Between 1997 and 1999, half of the affected households had an adult member (20 years or older) who was seriously ill, and 34 percent had experienced the death of an adult member. Also, nearly one-third of the households had absorbed a new member since 1997. The new member was taken in due to illness or death in their previous households or because the person was ill. At the time of the 1999 interview, one-fifth of the households had a member who was chronically ill during the past six months.

Photo credit: Opportunity International

HIV/AIDS adversely affects the financial status of microentre-preneurs’ households. When the affected households were compared to non-affected households, these differences were apparent in 1999:

The proportion of household members who were not economically active was greater in HIV-affected households (40 vs. 32 percent; p < .01).
HIV-affected households (18 percent) were less likely than others (9 percent) to seek medical treatment when needed due to a lack of funds
(p < .01).
The monthly income for HIV-affected households was less (Z$3,344 vs. Z$4,142; p < .05).

The lower monthly income among HIV-affected households appears to reflect a smaller amount earned from the household’s enterprises. The monthly net revenue from the household’s enterprises was $521 less for the HIV-affected households (p < .05), when matching households to control for differences in 1997 in poverty status, economic dependency ratio, whether the household had been affected by serious illness or death between 1995 and 1997, and for level of monthly net revenue from household enterprises.

The findings suggest that chronic illness and death influence the amount of income the household earns from its enterprises, which in turn affects their overall monthly income level. The results imply that less attention is devoted to the household’s enterprises when the owner and other households members have to address illness or death in the household.

By 1999, HIV-affected clients had greater financial constraints than HIV-affected non-clients. Affected client households had more members and a higher ratio of members who were economically inactive. More affected clients (16 percent) than affected non-clients (9 percent) had become widowed since 1997, and there was greater loss of wages as a source of income among the affected clients. Possibly related to these other factors, a lack of funds caused more households of affected clients (22 percent) than affected non-clients (13 percent) not to seek medical services when needed during the six months prior to the 1999 interview.

Participation in a microfinance program can lead to income smoothing and better financial management. The results of the impact analysis that controlled for selected initial differences suggest that participation in Zambuko’s program had a positive effect on the HIV-affected client households (Table 1). Given two households with the same poverty level, the same number of income sources, the same economic dependency ratio, and same status related to illness or death in 1997, the household with a Zambuko client had a significantly higher number of income sources than the affected non-client household in 1999. This impact result indicates that credit had permitted the client households to pursue an income diversification strategy to smooth the flow of household income, since enterprise earnings normally vary from month to month.

Table 1. Impacts of microfinance on affected clients and their enterprises suggested by the ANCOVA analyses of the survey data
Findings (1999 compared to 1997)¹		Statistical significance (p value)
At the household level, HIV-affected clients compared to HIV-affected non-clients had:
	A greater number of household income sources (+.23)	< .01
	A higher proportion of the household's boys aged 6-16 in school (+5%)	< .10
At the enterprise level, HIV-affected clients compared to HIV-affected non-clients:
	Worked fewer hours the previous week in household enterprises	< .05
	Had a greater proportion insisting on a deposit when extending credit to customers (+13%)	< .10
At the individual level, HIV-affected clients compared to HIV-affected non-clients had :
	Were more likely to have an individual savings account with a formal institution (+16%)	< .01
	Saved in more ways (+.43)	< .01
¹These estimates are derived from the impact analysis that was conducted on the four comparison groups. The analysis controlled for specific initial differences in 1997, including household poverty level, household economic dependency ratio, and whether or not the household had a crisis due to illness or death of a member between 1995 and 1997.

Participation in Zambuko’s program also positively influenced the savings patterns of the clients from affected client households. Compared to affected non-clients, they tended to save in more ways, which is important since each savings mode usually has a different intended use, and a greater proportion had an individual savings account with a formal institution. These results are probably attributable to the financial management skills acquired through the training clients received and the discipline acquired through meeting loan repayment schedules.

Zimbabwe’s economic situation contributed more to repayment problems than illness and death. In the focus group discussions, both Zambuko officers and clients felt that the deteriorating economic situation in the country was more of a factor than illness and death in contributing to loan repayment problems in 2000. Also that year, the tense political situation had a negative impact on clients who had customers on commercial farms and in other rural areas. The general opinion was that if economic conditions had been better, households would have been better able to cope with the economic impact of illness and death. Nonetheless, clients and Zambuko officers who participated in the focus groups also felt that loans are a burden when the client is seriously ill or has to care for a person who is chronically ill.

Caring for the chronically ill and
departing the MFI program

An elderly Bulawayo microentrepreneur stopped taking loans from Zambuko because her unmarried son was ill with tuberculosis and she relocated to the rural areas to care for him. When the son died, she moved to Masvingo to care for an ill son-in-law. Spending time caring for the sick meant that her business activities were disrupted so she was unable to continue in Zambuko’s program.

Instituting mandatory insurance fees and providing HIV/AIDS information to clients are among Zambuko’s responses. Zambuko does not have a basis for estimating the impact of HIV/AIDS on its program and clients, but it has taken measures to reduce risks to its financial portfolio that are associated with HIV/AIDS and other factors. In January 2001, Zambuko instituted a mandatory insurance fee of one percent to cover the outstanding loans of borrowers who die. Other policy changes that have helped Zambuko manage risks include a mandatory savings requirement and strict enforcement of group co-guarantees of loan installments.

Other proactive measures have been taken by Zambuko’s Trust Bank Program, which targets the poor. HIV/AIDS specialists have attended meetings of Trust Bank clients to discuss ways to care for an HIV-infected person. Other experts talked about legal issues facing women, such as dealing with relatives’ claims on a deceased husband’s property.

Proposals to help MFIs respond to client needs include training, new loan products, and networking. A number of suggestions were made in the focus groups with clients and Zambuko staff. These include:

Provide smaller, shorter-term loans (e.g., six months) to reduce the risk of loan defaults since the economic situation and prevalence of HIV/AIDS make it difficult to predict if individuals can meet their loan obligations over a 9- to 12-month period.
Educate clients about HIV/AIDS-related issues.
Train loan officers in communications skills to better enable them to respond to the HIV/AIDS-related situations they encounter.
Encourage clients to teach teenage sons and daughters how to manage their enterprises, so that the child could operate the business if the owner became ill or died, or had to focus on caring for a sick person.

Political disturbances affected MFI program participation

A former Harare client’s enterprise was doing well until the political disturbances on the commercial farms in Mazowe disrupted her activities. Most of the farm workers fled due to problems on the farms, and some of those who left owed her money. Because she lost her main customers, she stopped borrowing from Zambuko.

Representatives of MFIs, HIV/AIDS service organizations, and donors participating in the forum stated that the forum should be regarded as the launching of networking and collaboration between MFIs and HIV/AIDS service organizations. They suggested a role for a permanent forum and identified a facilitator. The participants also suggested a number of ways that MFIs might better address the impact of HIV/AIDS on their institutions and clients. For instance, they suggested that MFIs work together to combat the denial of HIV/AIDS in Zimbabwe. There was general agreement that MFIs should develop new products and take actions to ensure that their clients are better educated about HIV/AIDS-related topics. The education might be provided by the MFI or by establishing linkages with an HIV/AIDS service organization.

< Key Findings (page 1) | Table of Contents | Next >