Microfinance: New helpline during natural disasters?

By Asma Azmi

Microfinance Focus, Feb. 27, 2010: World’s poor are the major victims of any natural disaster striking our planet. Their meagre livelihood leaves them vulnerable to the post disaster upheavals. Faced with unemployment and unsteady market conditions, their lives become a constant struggle for daily sustenance.

Although there is always a surge in aid and grants to a disaster affected region, they are often poorly targeted and confronted with logistical issues and are thus rendered ineffective in the recovery process. Microfinance Institutions, on the other hand, with their locally spread network have, time and again, proved to be the first to lend a helping hand to the disaster victims and assist in rebuilding their disrupted lives.

HAITI QUAKE:

The potential of MFIs in providing relief work got officially endorsed when the US government placed cash in the hands of Fonkoze, the largest microfinance institution in Haiti, in a mission that required close cooperation of the U.S. military, the United Nations and multiple US government agencies to reach out to the victims of January 12th earthquake in Haiti. In the wake of this disaster, Fonkoze was the only bank able to stay open for customers making withdrawals and receiving money transfers. Despite the devastation, Fonkoze has been able to quickly reopen 37 of its 42 branches, including the main branch in Port-au-Prince. Within the first week of re-opening these branches, Fonkoze delivered more than $1 million in remittances and savings to Haitians.

BANGLADESH CYCLONE:

BRAC, an MFI in Bangladesh has provided emergency aid and rehabilitation in Bangladesh since its inception and carried out large-scale relief and rehabilitation activities there for cyclone and flood victims in 1987, 1988, 1991, 1998, 2000, 2004 and 2007. BRAC was one of the first on the ground to provide relief in the wake of Cyclone Sidr and mobilized USD 33.8 million for its initial relief and longer-term rehabilitation efforts. Over 10,800 people took shelter in 15 BRAC cyclone shelters constructed after Cyclone Sidr struck the region in 2007. BRAC staff was working around the clock since before Cyclone Aila hit the south-western coast of Bangladesh last year, to evacuate people and immediately launched relief efforts. BRAC used 10 million Taka (about USD 150,000) of its own funds to provide initial relief.

TYPHOON IN PHILIPPINES:

In the wake of disastrous typhoon Ketsana in 2009, the microfinance community of Philippines reacted promptly. ASKI, one of Kiva’s local microfinance partners personally delivered $26,000 of relief goods in dangerous areas to all affected communities based on their needs. It also set up a Disaster Council for future financial and logistical planning. It has also implemented mandatory crop insurance from the government of the Philippines for all agricultural loans.

CHINA QUAKE:

After the devastating earthquake of 2008 in China, Danone, of France along with Grameen Trust and CPAD (China’s State Council Leading Group Office of Poverty Alleviation and Development) signed a cooperative memorandum to set up the Grameen-CPAD-Danone Micro-Credit Initiative with a donation of 20 million yuan from Danone to assist the quake zone in its reconstruction. Grameen Trust provided technical backing for the initiative, CPAD offerred policy guidance and China Foundation for Poverty Alleviation (CFPA) was in charge of its implementation. Within few months of its implementation it has provided loan surpassing 16 million yuan to farmers nationwide.

LANKAN CONFLICT:

Sareeram an MFI in Batticaloa, Sri Lanka operates in the conflict affected North East Province. It was the first to bring relief when the Boxing Day Tsunami struck the area since it had good vehicles and officers on duty, whereas it took few days for the relief agencies and government bodies to arrive with aid. CARE India designed a lease-to-own product to help diversify income generating activities of fisherman affected by Tsunami. The product was introduced one year after the Tsunami to support sustainable livelihood activities and reduce the dependence on subsidies and grants.

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