Introduction

Microfinance and Disaster Management

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Objectives

To gain an understanding of:

• natural disasters• the basic ideas behind disaster management• disaster management from the perspective of a MFI• the goals of this training course• the modules that make up this training course

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Topics

1. Natural disasters2. Disaster management3. Microfinance and risk management4. Goals of this training course5. Modules in this training course

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1. Natural Disasters (1)

Individual reflection: Try to write a definition of ‘natural disaster’.What natural disasters have you seen in your context?What happened? How were people and communities affected?

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Natural Disasters (2)

A natural disaster is a natural event, sudden or progressive, with such severity that the affected community or country has to respond by taking exceptional measures:

• It can be a flood, cyclone/typhoon/hurricane, fire, blizzard, earthquake, tsunami, volcanic eruption, etc.

• Some of these are ‘rapid-onset’, some are ‘slow-onset’

• Some are seasonal, some are predictable

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Natural Disasters (3)

Natural disasters are indiscriminate, but their impact is usually more devastating for poor households, for the following reasons:

• They have fewer options for coping with them.

• They are more likely to be located in ‘danger’ zones - for example, below the flood line.

This is why natural disasters appear to strike the poor more often – because, in fact, they do!

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2. Disaster Management

• Disaster management seeks to improve measures relating to disaster preparedness, response and recovery. It is an ongoing concern – before, during and after natural disasters strike.

• Most discussions regarding ‘microfinance and natural disasters’ focus on emergency relief. However, MFIs need to address some broader issues of ‘microfinance and disaster management’.

• We ask: ‘What is disaster management from the perspective of a MFI?’

• MFIs need to take a more responsive (and less reactive) approach to disaster management – including disaster preparedness, response and recovery.

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The Disaster Management CycleDisaster preparedness comprises the steps taken before a disaster to mitigate its effects. It aims to build institutional and management capacity to respond in times of crises.

Disaster response comprises the actions taken immediately before, during and after a disaster to try to minimise the negative impacts of the crisis.

Disaster management seeks to improve measuresrelating to disaster preparedness, response and recovery.

Disaster recovery is the sum of short- and long-term activities that attempt to normalise social, economic and environmental conditions after a disaster.

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3. Microfinance and Risk Management

Microenterprise Development

Growing clientincome and assets

Risk Management

Protecting client income and assets

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Microfinance and the Disaster Management Cycle

Institution buildingGovernance, HR development, portfolio management, MIS, etc.

Emergency relief? Financial concessions?

Accounting measures?

Can be Reactive

Liquidity Crisis?

Management Crisis?

Recovery Crisis?

Disaster preparedness plan

Risk mapping & assessment

Geographic & sector diversification

Mutualawareness-raising

Emergency liquidity

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4. Goals of this Training Course

• Learn from international experience in ‘microfinance and disaster management’.

• Deliver concrete strategies that MFIs and multi-sector NGOs can use to respond to disasters without jeopardising their core business of providing sustainable financial services.

• Assist MFIs to develop disaster preparedness plans so that they can better withstand and respond to future disasters.

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5. Modules in this Training Course

1. MFI preparedness

2. Client preparedness

3. Rapid response

4. The role of microfinance in livelihood restoration

5. Livelihood restoration

There is some overlap between each of these subjects.

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Module 1: MFI Preparedness

This module considers the key ‘institutional’ issues an MFI should address to prepare for possible disasters, including:

• identifying a disaster risk profile;

• reducing the institution’s vulnerability to these risks; and

• preparing a disaster response plan.

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Module 2: Client Preparedness

This module considers disasters from a client's perspective, including:

• risk management strategies used by poor households;

• financial coping mechanisms employed by people during and after disasters;

• the products an MFI provides its clients (savings, credit, insurance); and

• how these products can be used to lessen a client's vulnerability to disasters.

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Module 3: Rapid Response

This module considers how MFIs can respond during and immediately after a disaster, including:

• the ways an MFI should assess damage, adjust its operations in light of the disaster, and provide new products and services that may be in demand after a disaster; and

• the impact of the disaster on the MFI itself and on its management and staff, and how it can address these impacts in a sustainable manner.

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Module 4: Microfinance in Livelihood Restoration

This module considers the place of financial services in livelihood restoration, and their relationship/interaction with typical livelihood restoration activities. Subjects include:

• guidelines for co-existence of grants and loans;

• microfinance and cash-for-work programs;

• microleasing; and

• savings for risk mitigation and crisis recovery.

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Module 5: Livelihood Restoration

This module considers the broader issues of economic recovery after disasters, especially different types of livelihood promotion activities and the impacts of these on broader economic recovery and long-term institutional sustainability.

This module is intended for relief and development organisations that provide microfinance services as part of a broader vision to provide livelihood support after a disaster. It is not intended for MFIs that engage in microfinance only.