May 12, 2022
Few realized how much damage banks and other financial institutions in emerging markets had suffered as the COVID-19 epidemic developed in early 2020 and dangers to banks and other financial institutions increased. The concern was obvious. When the pandemic turns into a financial crisis, the negative consequences on individuals and firms are likely to worsen, complicating emerging market attempts to support economic recovery.
In October 2020, International Finance Corporation started an online survey of its wide network of clients to assess the health of financial institutions. The outcome was one of the first descriptions of the pandemic’s early impact on emerging market financial institutions.
According to the recent survey study, developing market financial institutions were on the mend and were boosting operations back to pre-pandemic levels by late 2021.
There was a noticeable shift in outlook among the institutions. By the end of 2021, the majority of lenders had a much more positive outlook on their operations than they did a year before. Most financial institutions believed the COVID-19 crisis’ impact on their portfolios had peaked, with fewer than two out of ten expecting NPLs to worsen in 2022. Nine out of ten survey respondents stated they expected to be fully functioning by the end of 2022, with only a few predicting more liquidity issues.
Through the end of 2021, financial institutions in Eastern Europe and Central Asia experienced a stronger recovery in collections, while those in South Asia, East Asia, and the Pacific lagged the most.
Source: International Finance Corporation (IFC)
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