Covid-19 and microfinance institutions in Somalia challenges and practical solutions

Microfinance refers to a small loan, insurance and savings which is mainly granted to people with a low income in extreme poverty in order improve their lives and alleviate poverty in the community. The purpose of this thesis is to investigate how Covid-19 has impacted the microfinance institutions in Somalia and what was the major challenges they had faced since the onset of Covid-19 pandemic. Both qualitative and quantitative methodology has been used through conducting a case study in Mogadishu and Hargeisa. The data was collected through a questionnaire distributed to the Somalian microfinance institutions in 2022. The results showed that Covid-19 has had a moderate impact on MFIs. It had also found that most MFIs witnessed high credit risk and an increase in savings withdrawals. In addition, MFIs had faced many financial and operational challenges including difficulties in meeting clients in the offices, disbursing loans, default of loans, increase in non-performing assets, declining profits, financial crisis, and many other challenges. To overcome these challenges, the thesis found that MFIs have to diversify their financial portfolios, improve the digital innovation, reschedule loans, seek government assistance, and increase investments in different sectors in order to mitigate the impacts of the Covid-19 crisis. Key terms of the research: Covid-19, Microfinance Institutions, Somalia, Challenges, Solutions.