Microfinance in Sudan After the War (Part 1): From a Poverty Alleviation Tool to a Pillar of Reconstruction and the Digital Economy

Dr Marwa Fouad Qabbani
Expert in Strategic Planning and Digital Transformation
Since the outbreak of war in Sudan in April 2023, the national economy has experienced an unprecedented shock that has affected virtually every productive and financial sector. Among the hardest hit has been the microfinance sector, whose success depends fundamentally on geographical outreach, close engagement with local communities, and the continuity of everyday economic activity. Thousands of small and micro-enterprises have been disrupted, financing portfolios have stalled, bank branches have been damaged, supply chains have been severed, and risk levels have risen sharply. As a result, microfinance institutions have seen their ability to fulfil their developmental role significantly weakened.
Despite these challenges, there are growing signs of a new phase led by the Central Bank of Sudan through efforts to establish partnerships with regional and international development and financing institutions to revive the sector. Reports concerning cooperation with the French Development Agency (AFD) indicate that the focus has shifted beyond the provision of emergency financial resources towards rebuilding the sector on more sustainable institutional and digital foundations. This includes technical assistance, capacity building, strengthening operational infrastructure, and preparing microfinance institutions to access long-term development finance.
This initiative reflects an important shift in the perception of microfinance. It is no longer viewed merely as a social programme for poverty reduction, but increasingly as an economic instrument for revitalising production, promoting entrepreneurship, creating employment opportunities, and advancing financial inclusion—all of which are essential pillars of post-war recovery and reconstruction.
Microfinance: More Than Just Loans
Microfinance refers to the provision of financial services to individuals and small and micro-enterprises that are unable to access conventional banking services because of insufficient collateral, limited income, or the absence of a formal credit history.
These services extend well beyond lending. They include savings products, agricultural finance, Islamic finance, micro-insurance, money transfers, electronic payment services, business advisory support, training, and assistance in connecting producers with markets.
International experience consistently demonstrates that microfinance achieves the greatest impact when it is delivered not as a standalone loan product but as part of an integrated development framework that combines finance with capacity building, marketing support, technology, and value chain development.
The Origins of Microfinance in Sudan
The first microfinance initiatives in Sudan emerged in the 1990s through limited programmes implemented by several banks and development organisations. However, the sector’s real expansion began in 2007, when the Central Bank of Sudan introduced dedicated microfinance policies, requiring commercial banks to allocate a proportion of their financing portfolios to the sector while establishing specialised units and strengthening the regulatory and supervisory framework.
These policies contributed to significant growth in microfinance activities and encouraged the establishment of specialised institutions. International organisations also supported programmes targeting rural women, farmers, artisans, young entrepreneurs, and household-based producers.
Despite this expansion, the sector continued to operate in a challenging environment characterised by limited capital, inadequate technological infrastructure, high operating costs, and insufficient credit information. The war has greatly exacerbated these longstanding constraints.
Why Is Microfinance a Priority During Recovery?
The post-conflict environment differs fundamentally from normal economic conditions. Governments require rapid and practical mechanisms capable of restoring economic activity at the grassroots level. This is where microfinance assumes particular importance, as it reaches farmers, artisans, women entrepreneurs, and owners of small businesses directly, without requiring large-scale capital investment.
Every small enterprise that resumes operations represents a family regaining its source of income, a local market recovering its vitality, a new employment opportunity, and additional production that helps ease pressures on the national economy.
Investment in microfinance should therefore be viewed not simply as support for small loans, but as an investment in both economic and social stability.
The Sector Today: Challenges and Opportunities
Current evidence suggests that Sudan’s microfinance institutions face a range of interconnected challenges. These include shrinking financing portfolios, the closure or disruption of numerous branches, rising default rates, the loss of parts of their customer databases, limited funding sources, and escalating operating costs.
At the same time, the current period presents an opportunity to redesign the sector from the ground up, drawing on the wider transformation taking place within Sudan’s financial system. Key developments include digital transformation, the introduction of digital identity systems, the national payments switch, the expansion of banking agency services, and the growing presence of financial technology (fintech) companies.
This means that Sudan’s objective should not simply be to restore existing microfinance institutions, but to build a new generation of digitally enabled development finance—one that is more efficient, less costly, and better equipped to reach citizens in both urban centres and rural communities alike.

Shortlink: https://sudanhorizon.com/?p=16251