As we pass the 18-month anniversary of the onset of Covid-19 back in early 2020, our Sentinels continue to be fascinating bellwethers - of the pandemic itself and its economic effects. Some Sentinels’ organizations have been doing very well, almost thriving - using the pandemic to deepen their relationship with customers, build out new operations, especially in the digital area, and generally put themselves in a position of strength for the post-pandemic period. At the same time, others continue to struggle; as one Sentinel puts it, “we’re just trying to survive through the end of the year.” And finally, there are those in between. They’re coping, but with a limited ability to leverage the crisis as a means of reinventing themselves into stronger and more resilient organizations.
What separates these institutions’ experience, it becomes clear from the now dozens of interviews, isn’t solely (or even mostly) the quality of their response. Rather, it’s the support of three variables in combination, a sort of ‘three-legged stool’ of crisis survival.
First is the underlying strength of the institution going into the crisis - financially (their levels of liquidity and equity), operationally (the quality and commitment of their staff), and the depth of relationships they have with investors and funders who can provide flexible and responsive support in the midst of crisis. The Sentinels as a group generally score highly here - though some were certainly better placed than others.
The second factor is how lucky the institution has been in terms of the pandemic - whether the spread of the virus and its variants has been devastating or mild; the economic cost of the pandemic response from national and local governments, including the degree and length of lockdowns; the regulatory response; and the level of financial support provided by the state to financial institutions and/or their clients. Here, the variations are enormous. Some institutions are operating in areas that seem only mildly affected, while one is dealing with an economic disaster - along with government restrictions that essentially prohibit most microfinance operations. For at least two, seasonal and severe natural disasters are a compounding cruelty.
The third and final factor is the degree of innovation and adaptability that an institution can deploy in response to the crisis. While none of the Sentinels’ institutions continued business exactly as before, some have made major investments and changes in their operations. Many have introduced new products or services in response to changing client needs, as well as HR changes. But the degree of these changes varies, and several have made only modest adjustments.
In terms of this research, there have been ebbs and flows in the Sentinel project itself, with the addition of three new Sentinels from institutions in two regions, and the departure of another, who, following a change in shareholders of the MFI, will be stepping down as CEO. They have our sincere thanks.
The first series of installments was entitled ‘A Turbulent Spring’ - reflecting as it did the undulating challenges faced by the Sentinels from March to May, or thereabouts. This short series, ‘A Summer of Flux’, takes us from June to September, covering this strangest of (northern hemisphere) summers. It won’t try to be an exhaustive repository of everything said by every Sentinel across all the interviews - that would be impossible. It will, however, try to shed light on the last two of the three factors listed above: how the pandemic has affected institutions, their clients and staff; and how those institutions are responding (with various degrees of success) to the challenges they’re facing. The first part will be published next week. We hope you find it interesting.
