There have been a number of natural disasters that have impacted work in developing countries significantly. For providers of microfinance products and services, what are the best ways to plan for and recover from the storms?
When disasters strike, the first priority is always the safety of on-site staff members. A communication system or plan in the event of an emergency is critical. When infrastructure is down, such as power, telecom, and transportation services, safety involves access to food and water, medical care, communication, and safety from the chaos that occasionally follows natural disaster.
Planning for the immediate post-disaster includes these safety measures for both staff and clients, as well as organising and participating in services that are needed during and just after an emergency. As part of a community, the microfinance institution will participate in these community actions, but many will halt all new loan activities until the infrastructure is stabilised. It is important to have functioning commercial banks and government, so government policy and regulation is in force before beginning loan activities.
Many microfinance institutions plan for disaster by implementing a write-off subsidy fund, but many more find that re-evaluating a payment schedule, suspension of interest and principal payments during the immediate post-disaster, allowing interest-free savings withdrawals, and planning for new loan products such as housing repair loans are more beneficial.
To reinvest in infrastructure development and to support the ability of current clients, many microfinance institutions will provide post-disaster housing and home and business repair loans, with a longer payoff that the traditional small business loans. There are also considerations if the loan-taker is killed or injured during the disaster; coordinating humanitarian relief efforts for clients with local NGOs, or plans to hold interest and principal payments during recovery are going to assist in the long-term economic recovery of families hard-hit.
In areas that are frequently hit with disasters, planning for a disaster fund to support efforts at economic sustainability is considered a best practice. But in most cases, microfinance institutions will seek to restructure outstanding loans; offer alternate loans for housing repair, and to disaster-proof homes, loans to build storm drainage and sewage systems; provide referrals and contacts for emergency assistance; allow access to savings. Loans are almost never automatically forgiven. Even when the economic disruption is severe, in times of crisis, the informal economy is usually up and running quickly.
After a disaster, or in post-conflict economies, careful client selection is critical for new clients. There must be a clear understanding of the difference between microfinance and humanitarian relief, and the economy must be in a position to have needs for food, water, and health care met without having to disrupt business ventures. Training and support for staff members who can provide support and assistance, and perform a variety of functions, is also important. New technologies may allow staff to work remotely or from home when security or disaster makes transportation and communication difficult.
MFIs can help a post-disaster economy most by keeping staff safe and allowing communications to remain active between staff and clients; by adjusting collection methods and allowing access to savings; by assisting recapitalisation of village savings banks and associations, and by jumpstarting the informal economy. It is important that their role as a financial services institution not be confused with humanitarian relief organisations, which have a different role. Microfinance institutions can support emergency and safety efforts through communication, referral, and other support without taking on the role of providing emergency food and shelter, unless that is part of their brief.
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