“I have been constantly encouraged by the impressive examples of resilience, creativity, courage and commitment…  by the enterprise and the microfinance networks from Yemen to Iraq, Afghanistan, Sudan, Syria, Lebanon and Palestine,” said Jurgen Hammer, a consultant and moderator who spoke on 14 November 2025 at the Inclusive Finance 25 in Luxembourg hosted by e-MFP.

The panel discussion focused on the critical role of inclusive finance, particularly microfinance, in regions severely affected by ongoing conflict and crisis, primarily the Middle East and North Africa (MENA). Despite the efforts and the resilience of the industry, Hammer noted that only 1% of the $25bn of assets under management from PlaNet Finance lands in MENA.

Challenges and operational resilience

The ongoing armed conflicts, which are man-made disasters with unknown end dates, contrary to natural disasters, create immense challenges for microfinance institutions (MFIs) and their clients, explained Youssef Fawaz, executive director at Al Majmoua, a Lebanese MFI.  “Clients’ lives are devastated.”

Fawaz noted that clients are pushed into survival mode, losing homes and businesses. Displacement complicates client tracking and communication, especially when infrastructure fails. The situation is further complicated by the fact that sometimes loan officers are displaced themselves. Furthermore, funding often freezes, leaving only humanitarian channels available.

Business continuity is an MFI driving force

However, a core principle shared by MFIs in Syria and Lebanon is the necessity to maintain operations at all costs; there is “no point in being an MFI if in the moment of crisis [we] will stop disbursing,” stated Fawaz. “The First Microfinance Bank in Syria never stopped operations throughout 15 years of war,” said Rabee Daba, its CEO. He emphasised that “microfinance was created to work in a crisis. So, we need to find solutions to keep on going and serve the people.”

Adaptation and client-centric solutions

MFIs adapted their strategies to address profound changes driven by conflict and economic collapse:

1. Product diversification and flexibility: In Lebanon, Fawaz explained that Al Majmoua had to manage both a 34-day war (2006) and an open-ended financial crisis starting in 2019, which saw its portfolio value collapse from $100m to $3m in one year due to currency devaluation. 30% of its clients went out of business, and the number of MFIs went down from nine to two.  

Al Majmoua shifted from USD loans to local currency (LBP) loans, developed new products like agriculture loans with seasonal payments, and ceased housing loans as client priorities shifted to survival. When handling loan repayments during war, Al Majmoua avoided blanket grace periods, opting instead for individual, case-by-case adjustments based on the severity of impact on the client, which led to portfolio quality resuming quickly. “The portfolio at risk during 2024 went up to 30%. By July [2025], it was back to below 1%,” said Fawaz.

2. Maintaining client relationship:

As many clients were displaced during the war, Daba’s bank contacted 25,000 clients, one by one, to learn about their whereabouts, assessed their situation, and asked, “How can we support you without talking about loan instalments?” No penalty was charged to clients. The same approach prevailed following the 2023 earthquake; they deferred repayments and imposed no penalties.

“Syria is the land of hope and opportunities for everyone,” claimed Daba. The bank also used blended financing to provide solar panels and systems, addressing critical power and water shortages for homes and farms. He noted that after December 2024, the bank introduced "income-generating loans", or social loans, for essentials like food and fuel for the winter.

3. Client voice and impact assessment:

Pranav Sridhar, head of sales, Europe & Asia at 60 Decibels, said that his organisation is a financial inclusion initiative using technology to listen to microfinance clients in local language phone interviews, gender adapted, at scale in Lebanon. A follow-up interview with Al Majmoua clients revealed that 7 in 10 were accessing a loan for the first time, and 9 in 10 had no good alternative. Furthermore, 95% of respondents strongly agreed they understood the loan terms (conditions, penalties, and interest rates), indicating a very high level of client protection.

Jamal explained that Daman for SMEs uses a social and environmental performance management system in Palestine to measure the impact of small loans (up to $10,000) on the borrower's quality of life (e.g., housing, education, or environmental aspects like solar energy use).

Funding and risk mitigation

Investors often display "gregarious behaviour," retreating when trouble begins, observed Jean-Baptiste Cousin, partnership officer at SIDI. This contrasts with the amazingly low portfolio at risk achieved by many MFIs in these contexts, often because of the special relationship forged with clients—clients repay because the MFI was the only entity that showed faith in them. “As the MFI cared for the clients. Now, the clients care for the MFIs.”

To address the inherent political risk and lack of funding, Cousin suggests that strategies should focus on protecting the MFI, which he defined as “the tool, the engine”:

• Credit guarantee schemes: Daman for SMEs in Palestine was created specifically to tackle political risk and uncertainty, remarked Jamal. “It is a locally driven initiative funded by international cooperation that includes Luxembourg,” said Cousin. Jamal explained that Daman provides a guarantee ceiling to MFIs, compensating losses due to "force majeure" events (e.g., military actions, closures). This mechanism provides liquidity and reduces the capital provision MFIs must set aside, helping to keep the MFI engine running. “The credit guarantee funds we are working with are essential for the resilience of MFIs. It is more important than talking about charity. Dignity is very important.”

• Blended finance: On the back of an economic crisis which resulted in funding for microfinance drying up, Fawaz remarked that Al Majmoua was able to access grants from donors, while redirecting its business towards non-financial services also helped the firm survive the financial crisis by providing an alternative revenue stream and allowing staff to transition from loan officers to trainers, saving jobs.