When War Criminalises Its Victims: Microfinance in the Face of Blind Credit Classification

Noaman Yousif Mohamed
In the exceptional context created by Sudan’s war, default in repayment is no longer an indicator of bad faith or weak capacity. It has become a direct reflection of the collapse of the systems of life and production. Yet microfinance institutions continue to classify the majority of their active clients—including those forced into involuntary suspension—as defaulters in the records of credit reference and reporting agencies. This harsh paradox punishes the victim rather than addressing the wound’s root cause.
From Individual Default to Systemic Distress
Historically, microfinance has been built on an assumption of relative stability: a production cycle, regular income, and periodic repayment. War has shattered this assumption at its core. Markets have ceased functioning, supply chains have broken down, producers have been displaced, and cash flows have collapsed. When the vast majority of clients default simultaneously, this is no longer an individual failure but a case of systemic, forced distress. Yet credit classification systems continue to apply the same tools designed for times of peace, recording defaulters and closing off future access to finance.
Credit Classification Stripped of Context
Credit reference agencies were created to reduce information asymmetry and manage risk—not to institutionalise exclusion during disasters. Indiscriminate blacklisting of war-affected clients strips credit classification of its fairness and turns it into an instrument of collective punishment. The result is prolonged credit paralysis and economic stigmatisation that prevents recovery even after the guns fall silent.
Cumulative Impacts on Microfinance Institutions
The damage does not stop with clients. As microfinance institutions accumulate large portfolios of “classified” non-performing loans, provisions rise, capital erodes, and lending capacity shrinks. Then comes the most dangerous loop: funders tighten conditions, the cost of funds increases, or financing dries up altogether, and institutions themselves fall into liquidity and profitability crises—sometimes leading to closure or forced mergers. In this way, the sector shifts from being a social protection tool to becoming a locus of financial fragility.
The Ethics of Finance in Times of War
Microfinance is not a purely commercial activity; it is a social and economic compact. In times of war, the ethics of finance must take precedence over the mechanics of collection. Permanently classifying forcibly affected clients as defaulters contradicts the very essence of financial inclusion and undermines trust between communities and institutions.
What Is Needed: Realistic and Fair Alternatives
The debate is not about ideal solutions or quick fixes, but about adopting rational, realistic measures that limit the cumulative impact of the crisis and prevent forced default from becoming long-term financial and social harm. Such measures include:
Suspending war-related classifications: Introducing a special “force majeure” flag within credit bureaus to freeze the negative impact of involuntary default.
Collective restructuring: Converting outstanding debts into flexible schedules linked to the resumption of economic activity, rather than rigid repayment dates.
Separating performance from circumstance: Adopting alternative indicators that assess repayment intent and pre-war credit history.
Regulatory intervention: Issuing exceptional regulatory directives mandating systemic treatment of forced default and preventing permanent credit stigmatisation.
Phased recovery finance: Establishing short-term recovery financing windows to restart operations, backed by shared guarantees or supported risk funds.
Conclusion
What we are witnessing today is not a repayment crisis, but a crisis of judging reality with outdated tools. If war victims continue to be classified as permanent defaulters, we will be closing the door to recovery with our own hands and transforming microfinance from a lifeline into a long-term constraint. Credit justice in times of war is not a moral luxury; it is a necessary condition for restoring both the economy and society.

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