Preamble 1

Goenka College of Commerce and Business
Administration
INTRODUCTION
OVERVIEW STATEMENT
Microfinance is defined as any activity that includes the provision of financial services
such as credit savings and insurance to low income individuals who fall just above the
nationally defined poverty line and poor individuals who fall below that poverty line,
with the goal of creating social value. The creation of social value includes poverty
alleviation and the broader impact of improving livelihood opportunities through the
provision of capital for micro enterprise, and insurance and savings for risk mitigation
and consumption smoothing. A large variety of sectors provide microfinance in India
using a range of microfinance delivery methods.
An exemplification of microfinance process
Poverty is the main cause of concern in improving the economic status of developing
countries. A Microfinance Institution is an organization that offers financial services to
low income populations. Almost all give loans to their members, and many offer
insurance, deposit and other services. A great scale of organizations is regarded as
microfinance institutes. They are those that offer credits and other financial services to
the representatives of poor strata of population (except for extremely poor strata).
Microfinance is increasingly being considered as one of the most effective tools of
reducing poverty. Microfinance has a significant role in bridging the gap between the
formal financial institutions and the rural poor.
The Micro Finance Institutions (MFIs) accesses financial resources from the Banks and
other mainstream Financial Institutions and provide financial and support services to the
poor. MFIs are the pivotal overseas organizations in each country that make individual
microcredit loans directly to villagers, micro entrepreneurs, impoverished women and
poor families. An overseas MFI is like a small bank with the same challenges and capital
needs confronting any expanding small venture but with the added responsibility of
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serving economically-marginalized populations. Many MFIs are creditworthy and wellrun with proven records of success, many are operationally self-sufficient.
The goals for MFIs are:
o To improve the quality of life of the poor by

providing access to financial and support
services;
o To mobilize resources in order to provide
financial and support services to the poor,
particularly women, for viable productive
income generation enterprises enabling
them to reduce their poverty;
o To create opportunities for self employment
for the underprivileged;
o To train rural poor in simple skills and
enable them to utilize the available
resources and contribute to employment and
income generation in rural areas.
PROMOTING WOMEN TO BE SELF RELIANT
Difference between microfinance and microcredit

Microfinance means the broad spectrum of financial services provided to the people of
low income groups. Conversely, Microcredit is a small loan provided to the persons of
below poverty line in order to make them self employed. The scheme is offered to the
people of below poverty line who lack collateral and are not eligible to take loan in a
traditional way. As microcredit is a financial service provided in microfinance, the terms
are used interchangeably by the people.
BASIS FOR
MICROCREDIT
MICROFINANCE
COMPARISON
Meaning
Microcredit is the small loan
Microfinance refers to the number of
facility provided to the people
financial services provided to the small
with less earning, to motivate
entrepreneurs and enterprises who
them to become self employed.
cannot take shelter of banks for banking

and other services.
What is it?
Subset
Superset
Includes
Credit Activities
Credit and non-credit activities
Till the time, when there is no such facilities like microcredit or microfinance is available
to the needy people. They fulfill their financial requirement by taking credit from the
money lenders who charge very high interest rates from the poor people because they are
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not eligible to take shelter of banks as they do not own any property to provide as
collateral. The emergence of microfinance has a very positive impact on the beginners
who wants to start their business, but cannot have access to the banking services.
JUSTIFICATION TO THE PROJECT

The ways in which microfinance and microcredit insurance tools provide social security
to the disaster prone areas of various countries are really remarkable. But there are
sectors of people still in the world who are till now unaware the effectiveness of the tools.
Is this really the lack of knowledge of such people? Or the fault lies in the hands of
such tool operators who are still not able to reach the mostly affected people?
Evidences can be tracked where microfinance tools have successfully mitigated the losses
caused by disasters but to throw light on the pre disaster combating techniques is the
main urge of our project i.e. how certain techniques are being developed in order to
reduce the effects of disaster. Studies reveal that 95% of the affected do not have any life
insurance or health insurance but interest in purchasing insurance jumped by 22% after
recent disasters.
The question arises have they learned to become self reliant? Or is it still lying with
their awareness?
The study suggested that the MFIs may take the lead in advancing loans for disasterproof housing, emergency loans, and asset replacement loans.
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They may design a special
product of disaster savings, for
which the government can
provide the matching grant.
Threats to be self reliant are
being addressed by MFIs and
loans are being provided at
immediate notice.
LITERATURE
REVIEW
The under mentioned literatures
were found relevant for our
project. They have been briefly explained below:I.
Stuart Matheson (2001) stated that most Microfinance Institutions (MFIs)

cannot ignore the possibility of being impacted by natural disasters. Many
operate in communities and regions where natural disasters are an annual
event. Natural disasters such as those caused by flood, storm, earthquake,
Tsunami, fire, etc. are a harsh fact of life for many poor households and
therefore, for the microfinance institutions (MFIs) that target them. Natural
disasters have a severe impact on the income and assets of poor households.
This paper discusses financial coping strategies of poor households and
highlights a range of financial products that MFIs can offer to assist these
households to manage their finances through difficult times. An MFI that is
weak under normal conditions will struggle to survive a serious natural
disaster. Strong MFIs are better placed to provide relevant and helpful services
to their clients. Successful MFIs have effective governance, strong human
resource management, accurate and flexible management information
systems, and effective portfolio management. They offer services that fit the
preferences and needs of poor households, they are efficient, and they operate
on a business-like basis. If an MFI wishes to prepare for a disaster event, then
its first commitment should be to on-going institutional strengthening. Most
MFIs cannot ignore the possibility of being impacted by natural disasters.
Many operate in communities and regions where natural disasters are an
annual event. It behaves such an MFI to make preparations for the impact of
natural disasters on their clients and on the MFI itself. MFIs will be better
placed to respond effectively when a disaster strikes if it has worked through
the issues, designed policies and products, and negotiated collaboration with
DMAs, before disaster strikes rather than in the midst of it.
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II.
KIRKY et al. (1997)
Kirkby et al.s disaster cycle framework highlights the overlapping stages of

disaster recovery, starting with pre disaster planning and prevention through
post-disaster. This framework identifies the appropriate types of programming
that can assist with the challenges of each stage. Programmers confronting a
repetitive disaster cycle can plan disaster-mitigation and disaster-management
programs for the following general stages.
Investments in prediction, preparation, and risk-proofing mechanisms during
the pre disaster phase;
1) Delivery of humanitarian assistance to avoid mass starvation and epidemic
diseases during the relief stage
2) Inputs to restore livelihoods on a sustainable basis during the rehabilitation
phase;
3) Investments in replacement of destroyed infrastructure during the
reconstruction phase and Disasters as used in this paper hereafter refer
only to natural disasters.
4) Support of opportunities for economic growth during the development
stage (at the end of the disaster cycle).
III.
HERBINGER (1994)
Another framework, the linking relief to development framework, also

provides important guidance for responding to natural disasters by
highlighting the need to link relief measures to long-term development
activities.
Under this framework, capacity-building activities would be a central part of
relief activities in a post-disaster setting, and disaster-mitigation strategies
would be part of development assistance programs at the development stage.
IV.
ANDERSON AND WOODROW (1989)
They have defined connections between relief and developments are designed
to reduce vulnerability to disasters and improve the capabilities of disasteraffected communities to protect themselves against future crises. Within this
complex process, microfinance programs are but one mechanism of disaster
recovery.
V.
PAUL, INSAH AND NANGPIIRE (2014)

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The main objective of the study was to find out how Microfinance Institutions
assist their clients in times of disaster. Study found that 40% of the victims
received reliefs from some Microfinance Institutions, just as 30% received
relief items from other organizations. It indicated that female forms the largest
percentage of victims during disaster constituting 65% whiles their males
counterparts constitutes 35%. The study also established that Moslem victims
formed the majority of disaster victims with 67% whiles Christians constitutes
33% of the victims. Research revealed that 5% of the victims received support
from family and friends whiles 25% of the victims did not received any
assistance at all. The study further shown that, 90% of those victims who
accessed the loan facility have paid back with required interest.
OBJECTIVES OF THE STUDY

Although the provision of microfinance services in post-disaster settings is growing, to
date there has been little attempt to synthesize the lessons of those who have found
themselves on the front line in disaster situations.
Our research examines MFOs experiences and experiments and documents the
challenges they confront in post-disaster (disaster-management) and pre disaster
(disaster-mitigation) settings. This gives particular emphasis to the following questions:
1) What stages of the disaster-to-normalcy transition process provide the
appropriate conditions under which an MFO, whether existing or newly
established, can operate?
2) Is there room for new MFOs in post-disaster settings, or should emphasis
instead be placed on enabling established MFOs to provide post-disaster
services?
3) Can MFOs effectively provide social services immediately after disasters
but provide only financial services after normalcy returns?
4) What products or programs do MFOs use to manage and mitigate natural
disaster conditions to protect their clients and their portfolios?
5) What are the implications for MFO performance, especially for loan
repayments, of choosing different products and programs during postdisaster situations?
6) To what extent can an MFOs program serve as a social safety net for a
community struck by disaster?
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RESEARCH METHODOLOGY
Many microfinance organizations (MFOs) now working in
disaster-prone countries have been caught up in natural
disasters as they have occurred and have become active
players in post-disaster situations. This project documents
the experiences and experiments of MFOs that have found
themselves on the front line in natural disaster situations.
Our project report synthesizes the lessons learned from such
situations and makes recommendations for donors, policy
makers, and MFOs. The information presented was
collected through an extensive review of the literature. The
review placed special focus on Bangladesh, India, Burkina
Faso, Nepal and South Africa.
COMMON MFOs IN OPERATION
ASSUMPTIONS
In order for an MFO to succeed and protect its clients in the event of a natural disaster, it
must be able to operate under the following minimum conditions:
1) Governments or donors must be able to undertake relief activities.
2) The local economy must be at least partially monetized.
3) The MFO should be able to access information for client preparedness and portfolio
protection from early warning systems that help predict slow-onset disasters.
4) A cohesive and trusting community must exist so that peer pressure can be used
effectively; and the country should have diversified environmental conditions and
be reasonably sized so that crop insurance and disaster insurance can diversify risk
effectively.
LIMITATIONS FACED
The following limitations were encountered while conducting the study:1) The literatures collected are in nature of secondary data and 100% accuracy cant
be ensured.
2) The drawn conclusion and provided recommendations may not be satisfactory
with respect to actual situation due to absence of direct communication with the
affected people.
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CHAPTER PLANNING
The body of the project has been divided into four chapters and their respective sub heads
which has been illustrated below;
Name of the chapter

Introduction
Conceptual framework/ National

and International Scenario
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Description
This includes overview statement, difference
between microfinance and microcredit,
justification of the project, literature review,
objectives of the study, research methodology,
assumptions and limitations faced.
This chapter includes eyeing the concept
which studies the linkages between
microfinance and disaster management and
followed by the experience analysis stating
various opportunities and challenges faced by
microfinance organizations.

Administration
Presentation of data, Analysis and
Findings
It contains various case studies both at

national and international level. There are
four case studies from international ground
and a special response to Nepal earthquake
followed by the situational analysis in India
elucidating the performance of SEWA,
Gujarat. Finally it suggests few findings from
the study conducted.
Conclusions and recommendations It is inclusive of conclusions drawn from the

entire subjective study followed by
recommendations for donors and policy
makers.
CONCEPTUAL FRAMEWORK/
NATIONAL AND
INTERNATIONAL SCENARIO
EYEING THE CONCEPT
Natural disasters occur in two forms: slow-onset disasters, such as droughts and famines,
and rapid-onset disaster, such as earthquakes, floods, hurricanes, landslides, and volcanic
eruptions. Rapid onset disasters are severe and difficult to predict well in advance but
usually are temporary. Slow-onset disasters develop slowly, can be predicted, and last
longer than rapid-onset events. Regardless of type of disaster, the effects on the stricken
populations are devastating. Natural disasters are common in the developing world.
Developing countries hit by natural disasters are faced with devising multistage recovery
strategies for their populations, as well as developing active disaster-mitigation programs
to reduce the effects of future natural disasters.
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Many microfinance organizations (MFOs) now working in disaster-prone countries have
been caught up in natural disasters as they have occurred and have become active players
in post-disaster situations. In other cases, programs originally developed as disaster-relief
programs have evolved into well-known microfinance organizations, such as the
Bangladesh Rural Advancement Committee (BRAC) in Bangladesh. Increasingly, new
organizations that arrive following disasters are taking a microfinance focus, designed to
put poor and rural populations back on their feet.
Why is microfinance seen as a logical mechanism for disaster relief as well as
reconstruction and development?
The answer lies in the flexibility inherent in microfinance: It can provide appropriate and
important services to those hit by disasters throughout the stages of relief, rehabilitation,
reconstruction, and development. Furthermore, microfinance has the potential to play a
strategic role in risk management before disasters strike, a characteristic particularly
valuable in disaster-prone areas. Disaster-oriented microfinance services range from new
and temporary services to those MFOs may undertake on an ongoing basis. Temporary
services include:
Emergency loans (relief stage);

Remittance services (relief stage);
Loan rescheduling/restructuring (relief/rehabilitation stage);
Loans to restore capital assets lost in disasters (rehabilitation stage);
Loans to rebuild housing and other infrastructure (reconstruction stage);
Loans to start new economic activities (development stage).
Loans for new activities may also be part of an MFOs ongoing services,
as would be loans for diversification of economic activities.
Other long-term financial services that is particularly relevant for disasterprone areas include insurance instruments to protect vulnerable
populations against future disasters (disaster mitigation); and savings
services to provide a personal safety net against future disasters (disaster
mitigation).
Unfortunately, although MFOs are increasingly being considered as
vehicles to jump-start a post disaster economy, the challenges they face in
disaster situations are enormous and not well understood.
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Disasters generate a plethora of challenges for existing and new microfinance

MFO GUIDES
PEOPLE
WITH OPPORTUNITIES
ANDnot
THREATS
organizations, but they
also present
opportunities
that should
go unnoticed. This
chapter identifies the unique opportunities, followed by the challenges that MFOs
encounter in countries either recovering from natural disasters or experiencing chronic
disasters.
EXPERIENCE ANALYSIS
OPPORTUNITIES
Disasters open up several opportunities for MFOs at the macro, institutional, and client
levels that are not present during normal times. They arise from both the supply side
(program funders or sources within the program itself) and the demand side (MFO clients
and the larger community of disaster victims).
1.) Supply-Side Opportunities
At the macro level, existing MFOs are often approached by international donors and
governments to channel money either loans or grants to the affected populations for
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relief and rehabilitation. This flow of external funds, often as grants, increases the capital
available to MFOs during the disaster period and improves their image in their areas of
operation. The opportunity to coordinate with governments and international donors can
also provide a forum for lobbying for microfinance-related issues so that these external
agencies do not undermine financial markets, especially during disaster times. At the
institutional level, when disasters strike, MFOs have a unique opportunity to assess their
vulnerability to disaster conditions and their ability to manage under them. Although such
learning occurs under duress, the resulting lessons can pay off in future disaster
situations. At the micro level, disasters provide an opportunity to examine MFO clients
vulnerable areas and capacities. This information can be used to develop new financial
products or to work with client groups to develop risk-mitigation strategies for the future.
2.) Demand-Side Opportunities

Demand-side opportunities emerge from MFO clientele as they respond to a disaster
situation. The loss of or damage to income-generating assets and workplaces creates an
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increased demand for credit, especially for replacing assets and reconstructing buildings.
Natural disasters also generate an increased flow of remittances from overseas or
unaffected regions, leading to a demand for fast and efficient services to transfer money.
These demands may be placed on MFOs by existing clients or by others in the
community who find themselves in need of a financial institution.
CHALLENGES
Listing challenges in post-disaster situations is a longer exercise than listing

opportunities, as MFOs face several challenges in providing financial services under such
conditions. Although many of these challenges are similar during normal and disaster
times, they may be amplified by disaster conditions.
1.) Fund Management Challenges
In normal times, MFOs are responsible for accounting for money received from their
creditors (whether donors, governments, or depositors). They are challenged to service
loans and depositors efficiently, whereby the demand for loans and deposit services can
be predicted with some certainty. In contrast, disaster times generate an outpouring of
grant and loan funds from donors and governments that require quick disbursement to
provide relief and rehabilitation services.
2.) Staff Administration Challenges
In normal times, MFOs encounter problems in recruiting, training, and maintaining
efficient staff that can screen, sort, monitor, enforce, and collect on loans so that program
objectives in terms of target clients can be met and loan defaults can be reduced to ensure
sustainability. During disaster times, MFOs are further required to do the following:
Prepare their staff to predict and deal with disasters.

Encourage staff to work in disaster areas during relief and rehabilitation
stages, which involve more time and effort to collect on old loans or make
and collect on new loans;
Train staff to sensitize clients to the difference between one-time grants
and loans so that the regular loan program is not undermined by relief
efforts;
Prepare staff to work under conditions with less logistical support and
damaged client records and collateral; and train staff to minimize
mismanagement of grants and servicing of non targeted clients.
3.) Changes in Program Objectives

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Program objectives of long-term outreach and sustainability are heavily challenged
during disaster times, when existing MFOs may be encouraged by donor agencies to
provide the affected population with new financial and social services. Part of the donor
pressure may be to service a new clientele, one at greater risk than the usual clientele. In
addition, donors may insist on relaxed loan terms and conditions because of humanitarian
considerations.
Though some MFOs may be independent of public funding, these requirements are
significant to donor mandate. The challenge is whether these MFOs can resist donor
pressure or alter their objectives during disasters, then revert back to their original
mandate once normal conditions return, without undermining their long-term objectives.
Newly established MFOs are challenged to find the appropriate balance between
financial and social objectives.
The question remains, Can new MFOs that begin operation during disaster times
with social objectives later move on to become financial organizations pursuing
economic goals?
4.) Client selection
Client selection is a challenge in normal times as well as disaster times. However, during
disaster times; MFOs face the dilemma of whether to expand services to the vulnerable
population to respond to obvious pressing needs, or to service only creditworthy clients.
If the MFO decides to extend services to the vulnerable population, the institution may
have to develop indicators that allow it both to serve the programs objectives and
effectively screen and select the targeted population.
5.) Products and programs and contract terms and conditions
In normal times, MFOs design their programs and products and related terms and
conditions for viable and competitive operation. In disaster times, MFOs must adapt
products and programs developed for normal periods to disaster situations, but in ways
that do not conflict with their long-term objective of sustainability. The important
challenge is to establish clear guidelines and cutoff dates for special products and
programs used during post-disaster stages.
6.) Contract enforcement
Given the incomplete information inherent in financial markets, MFOs are always
challenged by problems related to contract enforcement. In normal times, MFOs main
contract enforcement issues deal with repayment and collateral foreclosure on an
individual or group borrower basis. Disaster times exacerbate the situation, requiring
MFOs to manage widespread collateral damage or loss; widespread default resulting
from client injury, death, or migration; and losses to guarantors. The challenge is
especially intense for established MFOs that have minimal geographic and enterprise
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diversification and for new MFOs, which may have a less diversified clientele than
established organizations.
7.) Changing Demand for Services

During normal periods, MFOs lend primarily for income-generating activities and
secondarily for consumption. During disaster periods, demand increases for loans for
consumption purposes, loans to replenish assets lost or damaged, and social services
(such as emergency food or shelter) that precede income generation. Although social
services usually are outside the realm of microfinance services, MFOs recognize that
access to them affects households ability to return to productive activities and generate
income in the future.
Demand may be both short and medium term in nature. Once MFOs decide what
services they are prepared to offer, they are challenged to predict accurately the demand
for those services by assessing the magnitude of the damage so that programs will be
effective, timely, and of the appropriate duration.
8.) Coordination with Changing Suppliers
In normal times, MFOs are
expected to coordinate with
other
financial
and
developmental agencies to
avoid duplication and ensure
compatibility of efforts.
Disaster times make such
coordination
both
more
necessary and more difficult.
Several suppliers of social
and financial services enter
the market simultaneously
during the post disaster relief
and rehabilitation stages.
Many of these actors tend to
enter quickly with diverse
experience and objectives.
Those deciding to provide
financial services (often on a
grant or soft-loan basis) may
have little experience in microfinance, expect to stay only a short time, and be unaware of
the dangers of creating a dependency syndrome.
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It is challenging for existing MFOs to educate and coordinate with such new suppliers in
post-disaster settings. In addition, new MFOs may have to coordinate with established
MFOs to learn from their experiences and avoid duplication of efforts. On a different
level, MFOs also need to coordinate with insurance and credit guarantee programs (if
they exist) to cover losses to their portfolio and clientele.
PRESENTATION OF DATA,
ANALYSIS AND FINDINGS
ELUCIDATION OF CASE STUDIES
POST DISASTER SITUATIONS AT INTERNATIONAL
LEVEL
CASE STUDY NO.1 (Source: USAID, 1986.)
Lessons in Post-Disaster Loan Forgiveness: A Case Study

After the cyclone of 1984, the government of Bangladesh announced rural credit
forgiveness Program.
Under the program, old loans were rescheduled for longer terms with no additional
interest, new loans were extended to affected farmers even though they might have
defaulted on earlier loans, and a total loan forgiveness of all loans taken for the season
was granted. The program was announced without consulting with banks or assessing
farmers requirements. As a result, losses were heavy for the banks. Even those farmers
who began paying arrears and who were able to pay their dues withheld payment.
In addition, several loans were made without proper evaluation in order to meet the
government mandate to make loans to all farmers in the affected area who demanded
them. Some unaffected areas were also included under the program because it was not
cost-efficient to separate the two categories, which led to debt forgiveness for farmers
unaffected by the cyclone.
During the forgiveness program, banks lost principal and interest payments and
suffered from disrupted financial discipline, which affected future loan repayments.
A subsequent study of the Bangladesh farmers shows that they had demanded immediate
cash or in-kind relief loans rather than interest/principal wipe-off on earlier loans. It was
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later determined that banks should not be required to perform social welfare functions in
times of disaster and that a clear cutoff date should be specified for interest rate
exemptions.
ANALYSIS
Table no. 1 (Source: MRA)

TYPES OF OLD LOAN
AMOUNT
Short- term loan

Medium- term loan
Long- term loans
Total
Rs.65,000
Rs.80,000
Rs.1,40,000
Rs.2,85,000
RATE OF INTEREST
6.5%
5%
4%
Table no. 1 shows the share of various old loans before the flood took place which clearly
reflects that maximum amount of loan was of long term nature i.e. 60.05%, the reason
being people were reluctant for short term loans as it requires immediate pay off. Being
agriculture their main motive they preferred long term loans which were at low rate of
interest and repayment tenure was sufficient to gather funds.
23%
SHORT TERM LOAN
49%
28%
MEDIUM TERM LOAN

LONG TERM LOANS
TABLE NO. 2 (Source: MRA)
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TYPES OF NEW LOAN
AMOUNT
RATE OF INTEREST
Short term loan
Rs.2,00,000
4%
Long term loan
Rs.50,000
7%
Total
Rs.2,50,000
Table no. 2 indicates the types of loan after flood took place whereby MFOs opted for
providing short term loans at a lower rate of interest in order to ensure the pay back of
the loan. After the flood devastation MFOs in order to protect people excused the old
loans and incurred a huge amount of loss in respect of principal amount and interest.
Even people who intended to repay the amount even stopped paying the amount therefore
under rural credit programme scheme MFOs decided to provide short term loan at a
lower rate of interest to guarantee the repayment and removal of huge interest imposition.
FINDINGS FROM CASE STUDY NO. 1
MFOs use various mechanisms to protect their clients, including allowing immediate
withdrawal of both compulsory and voluntary savings, rescheduling the compulsory
savings component, and forgiving loans (principal, interest, or both).Loan forgiveness
during disasters is primarily used by public banks and cooperatives under a governmental
mandate.
Although debt forgiveness may benefit borrowers who have outstanding loans at the
time of the disaster, it creates apathy among other clients and increases losses to the
MFO.
In fact, the effects of loan forgiveness have been well documented as undercutting the
long-term objectives of MFOs and their clients indeed, more experienced
nongovernmental organizations (NGOs) report that they rarely use debt wipe-off as a
mechanism to protect their clients in a post-disaster situation.
What options have been more successful?

MFOs that mobilize voluntary and/or compulsory deposits in Bangladesh and India all
own clients to withdraw their savings during disasters and reschedule regular mandatory
contributions until normalcy returns. Some MFOs in India have also allowed withdrawals
from emergency/contingency funds built from members compulsory regular
contributions to reconstruct damaged public infrastructure, or they have divided the
emergency funds equally among members to meet medical expenses. The Small
Enterprise Foundation (SEF) in South Africa also makes compulsory savings available
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for immediate withdrawal without any penalty, but the institution expects members to
repay the funds after a specified time.
In addition, SEF pays no interest on deposits until the withdrawn money is repaid.
Methodology used by some programs is to implement state-contingent contracts"
whereby MFOs temporarily vary their financial design in post-disaster situations to
protect their clients. For example, SEF protects its clients during droughts by switching
from group to individual liability for group loans. It is expected that this will reduce a
domino effect created through collective loan default by all members of a group once a
few members default on their loans.
CASE
STUDY NO. 2 (Source: WOODROW, 1989.)
Cereal Banks in Burkina Faso

Cereal banks were initiated in Burkina Faso in 1974 by
FONADES, a French-based NGO. By 1986, 15 NGOs and
about 13 government entities were working with the cereal
banks. Cereal banks can be defined as self-managed,
village-based organizations that store and trade cereals.
The objective of cereal banks is to ensure food security to
rural communities during lean agricultural seasons by
safely storing members grains. Some banks also purchase
grains from members at prices slightly above market prices
during postharvest seasons; the members can then buy
back the grains at a lower price than the prevailing
market price during lean seasons. Several banks allow
members to borrow cereals on member-determined terms
and conditions to smooth consumption. The operational
funds are provided as grants by NGOs.
The basic elements of a cereal bank include the following: (1) a storage facility; (2) a
rotating fund, either in grain or in cash, that capitalizes the cereal bank, allowing it to
sell/buy grains or lend grains to members; and (3) a managing committee, elected or
selected from among villagers, that governs the bank.
ANALYSIS
TABLE NO. 3 (Source AMOIL Profiles)
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TYPES OF LOAN
AMOUNT
Food loan
Cereal loan
Monetary loan
TOTAL
Rs.4,000
Rs.52,000
Rs. 20,000
RS.76,000
TABLE NO. 4 (Source AMOIL PROFILES)

TYPES OF LOAN
NO. OF LOANS
% REALISED
Food loan
189
12.25%
Cereal loan
345
10%
Monetary loan
125
5%
Table no. 3 and Table no. 4 showcase the types of loan and the no. of loans offered to the
people to rescue them from drought. An implication being the number of cereal loan
ranks no. 1 and that is why people started depositing in cereal banks of MFOs.
FINDINGS FROM CASE STUDY NO. 2
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In addition to special methodologies or programs for postdisaster periods, specific financial products are
particularly helpful to clients in these settings. Most of
these products will be offered temporarily, and some may
reach a broader population than simply the MFOs
ongoing clientele. Products include housing loans, in-kind
and emergency loans for food and medicine, and
remittance services. Additionally, cereal banks have been
established to provide food and cereal loans in post
disaster situations. Disaster-related loans are generally
found to be effective if they are provided immediately
after a disaster. The timing and flexibility of housing loans
in particular are very important features that affect the
ability of such products to protect clients. The time lag
led several victims to relocate to other regions and repair their houses by themselves.
After project implementation in 1987, uniform amounts were issued as loans with
uniform terms and conditions to all borrowers. Their impact would have been greater;
however, had the loans been made on flexible terms and been issued according to demand
rather than having been restricted to people who previously owned houses in the area.
Only 659 loans were made, even though 1,000 were budgeted, and only 35 percent of
the loans were considered sound after three years of program implementation (USAID,
1987).Cereal banks are another financial product that, if used ineffectively, can fail to
respond adequately to user needs.
Thus,
CEREAL BANK
although cereal banks are effective in dealing with seasonal food shortfalls,
they seem to be inadequate during severe droughts unless augmented by external
assistance. Also, cereal banks that are not monetized and deal with only in-kind loans
appear to be more vulnerable to financial losses during droughts than do monetized
banks.
CASE STUDY NO. 3(Source: USAID, 1986.)
Disaster-Management Strategies by PROSHIKA, Bangladesh
PROSHIKA, an NGO, began as a relief agency in 1971 but soon realized that relief
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generating activities lead to a dependency syndrome among victims. Therefore, it started
providing subsidized and easy credit to disaster victims as a development strategy.
PROSHIKA soon learned, however, that subsidized loans drain an NGO-MFOs
institutional resources unless they are supported by donor grants.
A loan wipeout for flood victims in 1988 also proved to be a loss to reserve funds. In
addition, dependence on donor resources for disaster relief was limiting PROSHIKAs
timely intervention after disasters. In response, in 1991, a program for natural disaster
management for sustainable development was created. Also that year, a disastermanagement fund for US$0.19 million, capitalized by donors, was formed.
The fund is used to provide relief services to disaster victims until fresh donor funds
arrive. Methods PROSHIKA uses to provide disaster-related services include the
following:
i.
Relief stage: A small, one-time, instant-relief grant including food, medicine,

and cash is provided during the relief stage. It is expected to provide a limited
safety net through additional cash flow to victims (clients and non clients)
who suffer from loss of employment that follows immediately after a disaster.
The members are also allowed to withdraw from their compulsory deposits.
As a penalty, interest on remaining savings is withheld until the withdrawn
savings are replenished.
ii.
Rehabilitation/reconstruction stage: Interest-free, collateral-free new loans

are made to established clients so they can revive their income-generating
activities. These loans are provided for asset replenishment and for
reconstruction of houses damaged or lost.
The loans are to be repaid in monthly installments, but borrowers can choose to make a
smaller repayment every month and then pay a bigger amount at a later date once income
starts accruing. A total of 32,973 new loans (housing and asset replenishment) worth
US$3.89 million were made in 1997 for flood disaster victims; the on time recovery rate
has been around 68.4 percent.
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CASE STUDY NO. 4(Source: USAID, 1986.)
Disaster-Management Strategies by BRAC, Bangladesh
BRAC, the Bangladesh Rural Advancement Committee, was created in 1971 with donor
funds to provide relief services to victims of the war that led to the countrys
independence and of the cyclone that hit Bangladesh soon after independence. In 1991,
BRAC developed a disaster-response mechanism called the Post Cyclone Rehabilitation
and Development Program (PCRDP). BRAC based the program on the organizations
two decades of experience in working in disaster-prone areas. Under PCRDP, BRAC
managed the May 1997 disaster that hit the coastal regions of Bangladesh, killing more
than 4,500 livestock and damaging more than 580,000 houses and 215,000 acres of
paddy. The program worked as follows:
i.
Relief stage: In the first days after the disaster, BRAC used permanent
cyclone shelters to house and provide health care to victims. It also supplied
emergency food, water, and medicine to all victims (members and
nonmembers) in the project area.
ii.
Early rehabilitation stage: After two days, victims were moved back to their
villages. Members were allowed to withdraw their compulsory savings
(essentially borrowing from their savings) in order to secure some means of
cash flow to manage emergency requirements. The members were expected to
repay the withdrawn amount at an interest rate of 6 percent. BRAC officials,
with the help of the local community, immediately assessed their members
damages and considered housing reconstruction loans based on the extent of
the damages. The loan committee consisted of one BRAC official and one
local person. The members, usually females, were provided with a
reimbursement slip and were directed to collect the loan from the area office
after two weeks.
iii.
Late rehabilitation stage: A total of 26,000 households were provided with

loans amounting to US$0.32 million under the housing reconstruction
programs. These loans, after a one month grace period, were to be repaid in
weekly installments over one year at 15 percent interest. In addition, old loans
were rescheduled with a grace period for interest payments. The funds for
rehabilitation services are usually obtained from donors, with a limited
amount coming from a centrally placed reserve fund (about US$0.1 million,
created from the profits generated from the handicrafts shop operated by
BRAC). Experiments with village-level rehabilitation funds created after the
1992 floods were found to be difficult to manage and were therefore
discontinued.
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iv.
Early reconstruction stage: BRAC helped repair schools, roads, tube wells,
and water pumps and also assisted in desalinating ponds and opening wells in
the first four weeks after the disaster.
v.
Late reconstruction stage: This commenced after the fourth week of the
disaster. On a grant basis, BRAC supplied fresh seeds, fishing, and poultry to
group members whose vegetable/fish/poultry farms were destroyed during the
cyclone. BRAC also provided working capital loans from its resources. The
government reimbursed BRAC for grants and loans in the amount of
US$11,800.In total, relief and rehabilitation activities cost BRAC about
US$390,000. Funds were obtained from fresh donor grants (US$240,000 from
OXFAM, NOVIB, and CIDA) and from BRACs internal resources allocated
for disaster management (US$150,000). BRAC suggests that housing loans
are essential for effective use of grants and loans provided for asset
replenishment and income-generating activities. Of the housing loans made in
1995 to flood victims (amounting to US$650,000), 59 percent were repaid
within 30 days past due, and 14 percent were considered unrecoverable
(BRAC, 1995).
FINDINGS FROM CASE STUDY NO. 3 AND NO. 4
Established MFOs operating in areas

subject to chronic disasters are increasingly
developing mechanisms to prepare their
clients for such events.
Disaster-preparedness programs are now
implemented as part of several MFOs
ongoing activities during normal times.
Although several of these programs are
financed through special reserve funds,
they are increasingly being financed
through regular funds allocated for normal
MFO activities.
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In Bangladesh, OXFAM provides subsidized
loans for buying food and emergency products
and storing them under the earth as a reserve
during the relief/emergency stage after a
disaster. Housing loans are also provided in
normal times by MFOs such as BRAC,
PROSHIKA, the Grameen Bank, and
MYRADA for clients to build houses in safe
places. Group-based insurance companies in
Latin America are now providing loan and
savings protection to micro entrepreneurs.
BURO-Tangail, an NGO in Bangladesh, has
introduced enterprise insurance for members on
a pilot basis.
MFOs in Bangladesh provide several training
programs to improve the entrepreneurial ability of their clients to diversify into incomegenerating activities that are disaster-proof. Also, several MFO
training programs are in place for vulnerable groups helped by
the government in previous disasters.
However, these programs may be cost-effective only for
established MFOs that provide training programs as part of
their regular services.
In addition, shelters have been built in safe places to protect
clients affected by floods, and irrigation projects have been
implemented to protect against droughts.
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RESPONSE TO NEPAL EARTHQUAKE 4TH JANUARY 2016
In a country with poverty that is already among the highest in the world, the devastating
earthquake in Nepal this April caused more destruction and destitution than could have
been imagined. The Nepal earthquake, estimated to have been a magnitude of 7.8 to 8.1,
caused more than 8,800 deaths and 23,000 injuries. There is also a great deal of coverage
of the toll this has taken on Nepali families and the international response. Recent data
shows that it will cost over $6.6 billion and at least five years to rebuild the country,
according to Nepali government officials. More than one million people may be
stranded in extreme hardship for quite a long time. Local microfinance institutions have
been working hard to triage their clients needs and thinking longer-term about the best
response to this disaster.
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The earthquake seriously affected 14 districts in Nepal, and microfinance clients are
among the hardest hit. From preliminary information collected by
RMDC and its members, here are the statistics of those affected:
1) No. of MFIs affected: 29 (only 4 are highly affected)
2) No. of branches of the 29 MFIs: 142
3) Members/clients affected: 129,000
4) Member deaths: 126
5) Homes of members destroyed: 163
6) Branches of MFIs damaged: 7
7) Houses of Staff damaged: 90
8) Staff deaths: 1
9) Portfolio affected: Rs 2.44 billion
10) RMDC Portfolio affected with MFIs: Rs. 1.29 billion
These details provide a snapshot of the disaster caused to Nepals microfinance sector by
the April earthquake. On the basis of preliminary analysis, RMDC and their members are
in the process of finalizing the following action plan:
1) Providing soft loans to rebuild homes: temporary for short-term needs and then
planned homes for the long-term
2) Managing the livelihoods of the affected families
3) Managing daily necessities
4) Health and education
CREATING CONDUCIVE ECONOMIC ENVIRONMENT
1) Devising to revive the old economic and farm activities
2) Identifying appropriate local based microenterprises
3) Skill development trainings
FINANCIAL RESOURCE MANAGEMENT
1) Rescheduling/ writing off of the affected farm and microenterprise loans
2) Providing new loans at lower interest rates
3) Additional Rs. 2 billion will be required to finance in the affected districts
TECHNICAL SUPPORT
1)
2)
3)
4)
Disaster management training

Workshop on rehabilitation of affected MFI branches
Developing new microenterprises
Skill development trainings
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Microfinance An Aid to Nepals Post-Earthquake Recovery
o Overview
One month before a series of earthquakes ravaged the Kathmandu valley and surrounding
areas, efforts are turning to formulating a plan for recovery. With the onset of monsoons
and poor sanitation increasing endemic disease incidences, initial efforts have been
focused on temporary shelter, clean water sources, maintaining food supplies, and
continuing medical support. The people of Nepal are left largely to their own devices to
ensure their economic and physical recovery. Assuming, for the moment, that emergency
aid will begin to address the immediate humanitarian crisis, we are left with the issue of
how to ignite longer-term sustainable development.
Specifically, the questions that loom large are:

How to facilitate economic growth and development in a post-crisis context?
What can be done to mitigate long-term dependency on humanitarian aid? What
will have a transformational impact on peoples lives?
It is a well-established that the majority of net new jobs are created by small businesses.
Globally, small businesses provide between 65 and 80 percent of all jobs. Yet these small
businesses suffer from lack of access to capital. Providing credit through microfinance
offers an important and viable mechanism to strengthen and grow micro as well as small
and medium enterprises (SMEs).
Small business credit, in turn leads to the building of businesses, increased productivity,
job creation, and asset accumulation. Ultimately, this brings about intangible benefits,
such as economic self-sufficiency, empowerment of women, and improved standards of
living including better nutrition and education of children. , Therefore, we believe that
one of the primary areas of emphasis to support Nepals economic recovery needs to be
strategies, policies, and infrastructural investments that encourage the growth of small
business.
Microfinance has had a long and varied history beginning with the first pawnshops
founded by Franciscan monks in the 15th century to todays use of crowd funding and
peer to peer lending. In the mid-1800s, Lysander Spooner wrote about the benefits of
small loans to small businesses as an aid to exiting poverty and Friedrich Wilhelm
Raiffeisen founded the first cooperative lending bank to support farmers in rural
Germany. More recently, Muhammad Yunus, Nobel Prize Winner, introduced the concept
of microfinance through Grameen Bank. Grameen Bank now serves over 7 million poor
Bangladeshi women. The small businesses may be formal (registered) or informal (non28
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registered) entities. Formal businesses contribute, on average, 50 percent of GDP in high
income countries and 65-80 percent of GDP in developing economies. East Asia and the
Pacific have the highest number of formal SMEs (11.2-13.7 million).
The 10 microfinance principles established in 2004 by CGAP and endorsed by the Group
of Eight include:
1) Poor people need loans, savings, and insurance and money transfer services.
2) Microfinance must be useful, helping raise income, build assets, cushion against
external shocks
3) Microfinance must pay for itself and not rely on donors or government
4) Financing must be offered through permanent institutions
5) Microfinance institutions (MFIs) must help integrate the poor into the mainstream
financial system
6) The job of government is to enable financial services not provide them
7) Donor funds complement and build private capital, not compete with it
8) Bottleneck is shortage of strong MFIs and managers
9) Interest rate ceilings hurt poor people by preventing MFIs from covering their
costs, which reduces access to credit
10) MFIs must measure and disclose performance.
Small Businesses (SMEs)

SMEs employ the largest number of people in aggregate and create the most net new jobs
across regions, particularly in low-income countries. Small firms have the highest growth
rates but the most limited access to capital, even though access to capital is also
positively correlated with higher job growth rates. The size of the micro and SME sector
and economic growth of a country are positively correlated. Our conclusion is that, for
Nepal, the road to economic recovery will be paved through job creation as an outgrowth
of financial support for micro and small businesses. Four channels lead to job creation
within the micro and SME sector: financial help for entrepreneurs, larger business
investments, increased liquidity in the marketplace, and indirect job creation through
supply and distribution chains and spillover effects. Currently, SMEs face challenges to
grow, particularly access to finance, a current finance gap of $2.1- $2.6 trillion. Globally
there are 200-245M formal and informal enterprises that to not have a loan or overdraft
but need one (unserved sector) or do have a loan but still find access to finance a
constraint (underserved sector), 90% of these are micro businesses (formal and informal).
The financial gap is more pronounced for women owned businesses. As in other
developing countries, in Nepal, there are many challenges that need to be addressed
before the necessary infrastructure can exist to support microfinance.
These include;
1) Inappropriate donor subsidies.
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2)
3)
4)
5)
Poor regulation and supervision of deposit taking MFIs.

Few MFIs that meet the needs for savings, remittances or insurance.
Limited management capability in MFIs.
Institutional inefficiencies (identity verification, design appropriate products,
grow business, reduce risk).
6) Inability to fund microloans through savings and with sufficient margins (high
transaction cost relative to loan size leads to high interest rates, upwards of 70%,
average is well over 30%).
7) Need for broader distribution of services for rural and agricultural entities.
8) MFIs need to increase in number, strengthen capacity, and expand diversity to
serve different needs.
Findings from the study

The aftermath of the devastating earthquake in Nepal makes an even stronger case
for supporting small-scale, distributed energy solutions. People whose homes have
been destroyed and now living in makeshift tents has basic energy needs that could be
met relatively quickly through simple products like solar lanterns. As people rebuild their
homes, many more will give consideration to having stable power supplies. Going
forward, building resilient energy systems will help Nepal to recover faster from natural
disasters.
The United Nations Development Programme (UNDP) will share the latest on-theground situation in Nepal based their rapid response efforts, and their recovery
coordination with the Government of Nepal, UN agencies and the international aid
community, and highlight the importance of integrating disaster risk reduction into
energy access policy and programming to safeguard development gains and the linkages
between energy linkages and after disaster shore.
The United Nations Capital Development Fund (UNCDF) will share updates from its
four partner financial service providers on their relief and recovery support to their
affected clients, and how microfinance for clean energy can be integrated into these
efforts such as bundling housing with energy loans
While shocking, the tragedy is hardly surprising nor was the damage unforeseeable.
Poor infrastructure and poverty prevent adequate preparations in countries like Nepal,
and there will be immense human suffering in the months and years to come. This last
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sentiment is a common one. But it
presupposes that its the relief and aid
community that must take the lead after crises.
While there is an important role for those
organizations, there is also a vital role for the
financial services industry in helping people
rebuild their lives. Microfinance can be
genuinely transformative in this respect. The
microfinance industry has had its own share of
crises in the past few years some very real;
some overblown through misunderstanding
about its role, its capacity, and its limitations.
But from crisis has come opportunity, as social
performance
management,
appropriate
regulation and demand-driven products bring the sector closer to its founding ideals. As
natural disasters become ever more prevalent and serious a result of population growth,
and possibly of climate change as well so too has civil strife dominated the lives of
many in emerging economies in recent decades.
For poor people in countries suffering from these crises, life is an endless tale of
vulnerability. Microfinance can play a vital role in helping these people increase their
resilience to crisis, minimizing their vulnerability to poverty, insecurity and instability.
Restoring livelihoods and providing resilience to vulnerable populations are among the
core benefits that financial intermediation can offer, by providing access to savings,
insurance, emergency loans, remittances and income smoothing, among other services.
Microfinance providers are well-suited to play this role, building on existing relationships
of trust with clients that foreign NGOs cannot.
In these countries, disaster and conflict can lead to a negative feedback loop of poverty
traps over the short and long term. Incomes become less stable, and economic
productivity decreases. Market opportunities worsen, and infrastructure failings prevent
the movement of goods. Housing and working conditions deteriorate, and social cohesion
can be destroyed.
In response, the provision of fair, sustainable, scalable financial services to poor
populations, appropriate to the context and flexible to changing circumstances, can create
employment, drive economic growth, ensure a range of critical services, and bring people
together during times of shared difficulties. Microfinance can also build social cohesion,
while putting people and communities back on their feet. It will take years for the
communities affected by the earthquake in Nepal to recover. Relief and aid will always
have their place, and the rest of the world will need to send money and logistical support
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to help. But long-term recovery will require more than food packages and temporary
housing.
It will need livelihoods to be re-built, businesses to be grown, and the long-term

reconstruction of assets and skills. The applicants for the European Microfinance Award,
and the eventual finalists and winner will demonstrate excellence in providing services in
the hardest environments imaginable. With luck, their ideas and experience can be
leveraged to help millions of others recovering from future crises around the world.
FINDINGS FROM THE ELUCIDATION

1. Portfolio Managements
Protecting clients from disasters is a central concern of MFOs operating in disaster-prone
areas, both from a humanitarian and a business perspective. In its endeavor to remain a
viable financial organization, the MFO has a second major concern when disasters strike:
how to protect its portfolio from the effects of disasters.
2. Financial Programs and Methodologies for Disaster
Management
Mechanisms used for portfolio protection include loan rescheduling, with or without
interest, and credit guarantee programs designed to compensate MFOs for losses incurred
on risky loans. The effectiveness of loan rescheduling in protecting an MFOs portfolio
depends on the credibility of threat attached to defaults and the institutions long-term
relationship with its clients.
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An MFO client who places importance on his or her long-term relationship with the MFO
or who faces a credible threat of losing collateral benefits from the additional time
provided to repay loans. In turn, the increased likelihood of repayment of such
rescheduled loans protects the MFOs portfolio. Evidence suggests, however, that only
established MFOs with long-term client relationships tend to reduce defaults on
rescheduled loans. Even so, both new and established MFOs can protect their portfolio
using collection of collateral or severance of future transactions as credible threats.
MFOs experience with using credit guarantee programs to protect their portfolio has
been less encouraging, as several guarantee programs have not been viable and liquid
enough to meet the huge demand for insurance payments that occurs after a disaster.
3. Financial Products for Disaster Management
The financial products MFOs use to protect their portfolio in post-disaster situations
include new loans for asset replacement (to generate income) and housing and in-kind
(seed) loans. The rationale behind issuing new asset-replacement and housing loans to
protect MFO portfolios is as follows by replacing as soon as possible after a disaster the
non land assets the household uses for its main source of livelihood, and providing cash
loans to tide the client over during the initial post-disaster period, the MFO enables the
client to repay future loans and rescheduled old loans normally. Furthermore, from a
long-term perspective, new loans to old clients can help an MFO retain good clients and
protect its future portfolio.
In relationship lending, an MFO incurs a sunk cost in gathering information about its
clients. It is important for the MFO to maximize its use of that information by making
consecutive new loans to good borrowers. In addition, new loans made in times of
disaster based on long-term relationships with borrowers can enhance borrower loyalty,
as well as protect the MFOs portfolio through regular repayments.
4. Do new loans in fact protect against default on existing loans?
Evidence from the Association for Social
Advancement (ASA) in Bangladesh shows
that a new loan for asset replenishment
doesnt protect an MFOs portfolio in the
short run as intended. Rather, it was
observed that it takes about three or four
consecutive new loans to generate enough
income to service the rescheduled old debt
completely. ASA points to an alternative
financial product in lieu of asset-replacement
or housing loans.
5. Special Programs and Products for Disaster Preparedness

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Established MFOs operating in areas subject to chronic disasters are increasingly
developing mechanisms to prepare their clients for disasters. For example, since the
drought of 1990, some MFOs in Burkina Faso have insisted that their members develop a
contingency plan to deal with disasters. Such contingency plans reportedly reduced
arrears rates by about 30 percent during the 1995
drought. Some MFOs are also encouraging
clients to arrange for third-party guarantors
from a drought-resistant area to protect their
portfolio from the risk of covariance. Other
disaster-preparedness products include loans to
clients for starting disaster-resistant income
generating projects and enterprise diversification
to shock-proof households so that loan
repayments are not affected by natural disasters.
Insurance mechanisms such as group
contingency funds and private/indigenous
insurance have also been developed (examples
include credit unions in Latin America that
insure their portfolio with private insurers; loan
guarantee programs; and group contingency
funds formed by the Grameen Bank and SEF).
CONCLUSION AND
RECOMMENDATIONS
CONCLUSION
If MFOs confronting natural disasters can learn from the experiments and lessons
provided in this paper to create a disaster plan, resources will be better used, clients better
served, and portfolios made more resilient to shocks. Additionally, those involved in
disasters need to be better informed as to the limits of microfinance as a risk-reduction
strategy, and should be simultaneously encouraged to communicate with MFOs in
disaster-affected regions in the process of planning for and responding to natural
disasters.
After application of the mentioned methodology of studying the literatures available it
can be widely concluded that the MFOs have been able to combat the maximum needs of
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the needy or those who are affected. The case studies of Bangladesh, Cereal bank Africa
and SEWA GUJARAT acts as a pioneer for other MFOs including those newly set up.
But the question of pre situation analysis of disaster over an area by SEWA in Gujarat is
risky enough in terms of government expenditure and expectations of drought and
simultaneously the tools applied to overcome it may result faulty if the inherent capacity
fires back becoming the weak point. We all know future is uncertain and dynamic enough
involving multifaceted problems in it as a result tools applied by SEWA may not be
acting as the appropriate yardstick to combat droughts in Gujarat and other natural
disaster in India. Overall the post disaster techniques has been proved successful but there
still lies a drawback to include the entire affected population of the world as a single unit
and provide benefits to all.
Successful in eradicating poverty but failed in benefiting the neediest

RECOMMENDATIONS
Our project has documented the strategies used by MFOs in natural disaster settings to
protect clients and portfolios. This sub chapter provides recommendations for donors,
policy makers, and MFOs that actively participate in post-disaster situations.
DONORS
1) It is undesirable to start a new MFO during the early stages of a disaster,
especially if the MFO is expected to provide social services during that time.
Established MFOs are better equipped to deal with early stages of disasters,
especially if they have a dense network of branches.
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To avoid burdening long-term
MFO operations with the costs
of relief operations, it is
appropriate for donors to
provide grant funds for relief
operations.
If the donor arrives after MFO
relief
activities
have
commenced, the donor may
compensate the MFO for relief
expenditures so that the MFO
is fully capitalized to begin
rehabilitation
and
reconstruction loans in the later
phases of disaster recovery.
2) In no case should donors
encourage MFOs to make financial grants to clients or wipe out previous debts. In
addition, donors should allow MFOs to be active, rather than reactive to donor
pressures, in post-disaster situations.
3) Clear exit dates should be specified for any disaster-related grant facility. No
activity aimed at disaster relief should extend into the later part of the
reconstruction stage.
4) New MFOs that focus on financial activities can become sustainable operations if
they are established during the rehabilitation/reconstruction stages.
POLICY MAKERS
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Policy makers presume that MFOs have the capacity to
function as a safety net to populations in post-disaster
situations, and that they can jump-start an economy
affected by a disaster.
Based on the findings presented above, this is clearly
not the case.
Therefore, post disaster recommendations for policy
makers include the following four points:
1) Even well-established MFOs play a very
limited role in providing safety-net services,
and even then, services are primarily targeted to
the MFOs clientele.
2) Government grants can be channeled through MFO networks only if the MFOs
can effectively manage the provision of relief grants along with managing their
own credit programs.
3) In any case, the grant operation should not undermine the MFOs reputation as a
prudent financial intermediary.
4) Policies such as loan wipe-outs should never be used, as they compromise MFO
viability and do not benefit non borrowing victims.
5) Coordination among the several agents active in post-disaster situations should be
encouraged and actively supported.
Three Pillars the Support and Grow Small Business , Jobs and the
Economy
Focus on women
Women business owners are further constrained by the legal/regulatory
environment in which they operate and at the mercy of firm growth limitations
derived from societal-specific characteristics like education, training, size of firm,
and cultural barriers. Women business owners need access to the same financial
products as their male counterparts plus non-financial services such as support for
capacity building, networking and market information. Create government
supported incentive programs to strengthen MFI financial outreach to
women and women small business owners.
Embrace the future
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Invest in cost reduction tools, such as automated decision making to streamline
the decision making process and alternative scoring techniques (i.e., application
driven models, Entrepreneur Capability Assessment) and embracing
infrastructures already in existence such as internet and mobile phone banking. A
combination of products across micro and SME customer accounts (business and
business owner and employee of the business) to capture market share and
strengthen margins.
Infrastructure support
Creation of an incentive program for the registration of informal businesses to
reduce illegality and increase access to capital for appropriate growth and job
creation but recognize not all informal businesses have the capacity or
willingness. Incentives could include a reduced cost for registration, a simplified
process, reduced tax burden, and public outreach to articulate the benefits (e.g.,
selling to government or other registered businesses; access to new markets,
capital, technology, finance, capacity building, judicial system; better business
predictability).
It is incumbent on policy makers and private sector (finance institutions, financial
intermediaries) to intervene to encourage better banking services, higher deposit
rates, greater access to capital, regulatory reforms, better infrastructure,
competition in the financial sector, and support measures (i.e. development of
programs that lower costs of financial services for under and unserved micro and
SMEs).
The key to economic recovery, whether from a devastating earthquake or a
global recession resides in support for microfinance, access to capital for
micro and SMEs and the subsequent jobs created?
Anything less is simply temporary measures that are not sustainable and that will
have to be replaced repeatedly over time.
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We would love to thank all the websites and journals to help us in gathering information
for our study. The following sources were helpful while conducting our study:
WEBSITES
www.google.com
www.sewa.co.in
www.proshika.co.in
www.brac.co.in
www.sewa.co.in
www.bdmc.com
JOURNALS AND MAGAZINES

Benson, Charlotte and Edward Clay, The Impact of Drought on Sub-Saharan
African Economies: A Preliminary Examination, London: Overseas
Development Institute, Working Paper 77, August 1994.
Bornstein, David, The Price of a Dream, Dhaka: University Press Limited, 1996.
BRAC, Post Cyclone Rehabilitation and Development Program: August 1991 to
December 1994,
SEWA, Annual Report: 2013
SEWA, Annul Report: 2014
SEWA NEWSLETTER 2015
BRAC, Annual Report: 1996, Dhaka: BRAC, April 1997.
BRAC, Cyclone 1997: A Report, Dhaka: BRAC Rural Development Program,
May 1997.
Bratton, M., Financing Small Holder Production: A Comparison of Individual
and Group Credit Schemes in Zimbabwe, Public Administration and
Development, Vol. 6, 1986.
Department of Humanitarian Affairs (DHA), Focus: Tools for Disaster
Response, Geneva: DHA, 1997.
Disasters, Conferences: Disaster Preparedness: A Regional Challenge: Tashkent,
Uzbekistan, June 1996, Disasters, Vol. 21, No. 2, 1997.
Economist, Catastrophes and Fatalities, Economist, September 6, 1997.
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SEWA ANNUAL REPORT 2013, 2014 AND NEWSLETTER 2015 PRESENTS THE
FOLLOWING:
SEWA Urban:
The year witnessed several achievements derived through a lot of challenges:
5000 head loaders and hand cart pullers witnessed an increase of 25 to 30% in
their wages. This lead to an annual increase of Rs 7,80,00,000 in the income of
the workers.
A levy of 5 lakh rupees was being deposited by the owners in the welfare board.
With SEWA's efforts this amount of 5 lakhs has now risen to 15 lakh rupees. This
has change has happened after a gap of 30 years.
The annual turnover of SEWA's Rachaita Cooperative of Construction Workers

was registered at Rs 1,10,0000. From this the monthly income of 605 construction
workers increased from Rs 4800 to Rs 21000.
Waste recyclers were offered work in three slums .
The turnover of Geetanjali Paper Pickers Cooperative was registered at Rs

47,08,945. This cooperative supplied spring files to the biggest stationery
company of the world known as Staples and worked for several other IT
companies.
Bidi workers witnessed a price rise for the first time in several years. For 1000
bidis rolled now the workers are paid Rs 80 to 93 instead of Rs 12. This has
increased their annual income by Rs 2,99,52,000. Due to the changes undertaken
in the Government policies there has been retrieval in the scholarships being
provided for the children of bidi workers.
Due to the inception of SEWA's thread shop in Juhapura area of Ahmedabad city,
threads required for stitching were provided at nominal rates to the workers.
Due to renovation work in Bhadra area of Ahmedabad women street vendors lost
out on their vending space during the peak season of Diwali. This resulted in
formation of Bhadra Vechnar Mahila Bazaar.
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Street Vendors (Protection of Livelihood and Regulation of Street Vending) Act

was passed in 2013.
The Ahmedabad Municipal Corporation provided space beneath the Jamalpur

overbridge for the vendors market as designed by the SEWA team.Here with
included budgets for several such markets in its estimate report.
With the support of the police SEWA helped 120 street vendors of Kharikat canal
in Naroda regain their vending space.
Through the year SEWA helped 1501 vendors restart employments worth Rs 9,
36,62,400.
Amongst the main achievements of the current year is revival of Urban

Unorganized Labour Welfare Board. 4752 workers were registered with the
welfare board.
Through the year the Urban Union registered employment worth Rs 16,59,74,660
through 5061 women and similarly income worth Rs 23,15,02,920 was generated
by 86674 women.
SEWA Rural:
Emphasis was put on several major topics during the year. With challenges came
opportunities as well. This year 3,03,378 women earned income of Rs 134,56,49,837.
Ownership of 85505 women increased resulting in earnings worth Rs 49,72,27,379.
13900 children joined BalSEWA. 2,16,776 women received education through several
training exercises. 1,01316 women were made leaders.
Green Campaign: Through SEWA's green campaign, 2108 solar lamps and 1200 stoves
were sold. This decreased the consumption of wood and kerosene enabling women to
save their time and increase their yearly earning by Rs 3.81 crores.
Water Campaign: Since the last 20 years SEWA has been running its water campaign.
So far it has successfully built 4075 rain water harvesting tanks. In 2013, the water
collected in these tanks was 9,50,10,000 liters. This directly impacted the employment of
women. 1500 women are hand pump repairing technicians. In 2013, 49 women earned Rs
10,55,000. With the help of team SEWA in Dungarpur area of Rajasthan 50 new hand
pumps were implanted. Through the same team 50 rain water harvesting tanks were built
in Sri Lanka.
SEWA Gram Mahila Haat: Through SEWA Gram Mahila Haat women from
Afghanistan, Maldives, Sri Lanka and Bhutan received trainings in food processing.
SEWA Gram Mahila Haat was conferred with the Scotch Cooperative Leadership Glory
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Award by the Scotch Group and Golden Jubilee Memorial Smarak Grass Award by the
Gujarat Krushi Vigyan Mandal.
Rudi: Sale worth Rs 6,38,15,733 was undertaken through 3000 rudi women across 14
districts of Gujarat. From 15000 small and marginal farmers purchase of Rs 6,19,63,067
was done. 2500 rudi women take orders through mobile phones and earn approximately
Rs 5000 to Rs 15000 monthly. 3000 rudi women have earned yearly Rs 63,81,573.
SEWA Unnat Bazaar: In 2013, 49 women received income worth Rs 80 lakh. 225
women were imparted shirt making training enabling them to earn Rs 13,50,000. Total
sales registered at Rs 1,95,00000 through which 1767 women earned Rs 82 lakhs.
SEWA Manager ni School: Through SEWA's school 16,67,490 trainees received
trainings and 2000 master trainers were prepared. Women from Afghanistan, Sri Lanka,
Nepal, Pakistan, Maldives and Bhutan were given Managerial Input yLku Technical
training.
Gyan Vigyan Kendra (Knowledge Centres): Through 50 centres 3927 trainings were
imparted. These trainings witnessed participation from 65000 women. Income of 28,872
women increased. Through skill development school 25,000 women were imparted
training. 170 master trainers were prepared through several agricultural, animal
husbandry, salt pan work, construction work and food processing trainings. Currently in
every district 60 schools imparting training in agriculture, animal husbandry, stitching
and ICT are operational. Through these trainings women are now working in government
as well as non government offices. Post trainings over 200 women have initiated their
own business. Through SEWA Rural significant work has been undertaken in Afghanistan
and Sri Lanka. In Afghanistan 3200 women received training of which 80% women earn
an income of Rs 8000 to Rs 10,000. With SEWA's efforts Sabah Bagah e-Khazana was
formed in Afghanistan.
Sri Lanka: In Sri Lanka with the co-operation of its Government several trainings were
imparted to its women in different sectors ranging from food, garments, ICT, rain roof
and solar lanterns. 615 women were trained of which 40 women have become master
trainers. These women can now earn anywhere from 5000 to 12000 Sri Lankan rupees
monthly.
SEWA Bank: The total membership of SEWA Bank is one lakh members. Its share
capital is Rs 8 crores, number of accounts 4 lakhs, total deposits 120 crores, working
capital Rs 183 crores, 25000 women have taken credit worth Rs 78 crores, SEWA bank
has an inbuilt ATM service, 2000 women have joined the ATM service. Through SEWA
Bank's ATM card, money can now be withdrawn from ATM's across the world. Speaking
of Pension Scheme, 60,000 women have joined the UTI Micro Pension Scheme. This has
lead to capital formation of Rs 5.5 crores. SEWA Bank has inaugurated three new
branches.
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Apart from this, 1000 girls were imparted financial literacy trainings. Under SEWA's
credit scheme, housing and vehicle loans are now being provided. Under its Project, solar
lights, fans and hand pumps are sold and for these loans are available.
Social Security:
Health Care: Lok Swasthya SEWA Cooperative (LSM), a member-owned state level
cooperative enables women workers and their families to have access to life-saving
health information, prevent illness, obtain services when required thereby leading healthy
and productive lives. This is achieved by providing community-based, preventive and
curative health care, in a financially sustainable manner that promotes decision-making
and control by women workers of the informal economy. LSM's community health
programme supplements, and works in partnership with, the public health system where
health needs can be met through public health services. The Health Cooperative (Lok
Swasthya Mandali) is working on health-related issues such as ensuring maternity
benefits, occupational health benefits and the provision of health education for its
members and their community.
The main activities of the health cooperative are;
Health Education and Awareness
Referral services (curative care)
Occupational Health and mental health
Health Camps (eye, gynaecological, NCD, general)
Low cost medicines and Ayurvedic medicines productions
Linkages with government programmes & community based monitoring of these
Insurance (RSBY, VimoSEWA)
Through the health education and awareness sessions over 4 lakh members obtained
health and nutrition education and information on government health and child care
schemes. 277 women, health workers of Lok Swathya health cooperative, obtained
income of over Rs 50 lakhs for their health services.
Mahila Housing Trust: Through Karmika School across three states 450 women were
provided construction related trainings. A lot of water and sewage connection work was
undertaken. Across the states of Gujarat, Rajasthan, Madhya Pradesh and Bihar work was
carried out in 206 slums. Work was carried out for 36839 homes enabling 1,47,356
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people with basic facilities. Credit facility of up to Rs 88,85,000 was provided to 805
women who wished to avail basic domestic necessities.
For home renovation 42 women were given loans worth Rs 25,40,000. In Madhya
Pradesh home electrification was undertaken for 58 houses. The work of energy auditing
is undertaken across 4524 houses of Madhya Pradesh. In Surat's Credit Co-operative
through 1141 accounts savings worth Rs 39,68,895 was noted. The turnover of this cooperative was registered at Rs 59,43,196. In Vadodara's Credit Co-operative through 1141
accounts savings worth Rs 1,07,18,009 was registered. The turnover of this co-operative
was Rs 25,43,642. 120 women received land worth Rs 2,40,00,000. 222 women through
government schemes received subsidy worth Rs 1,99,80,000. Under Rajiv Gandhi
Scheme, 1,62,093 homes in Ahmedabad and Delhi were surveyed.
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SOUMMYA CHOWDHURY

Preamble 1

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Goenka College of Commerce and Business

An exemplification of microfinance process

Goenka College of Commerce and Business

o To improve the quality of life of the poor by

PROMOTING WOMEN TO BE SELF RELIANT

Difference between microfinance and microcredit

Microcredit is the small loan

Microfinance refers to the number of

facility provided to the people

financial services provided to the small

with less earning, to motivate

entrepreneurs and enterprises who

them to become self employed.

cannot take shelter of banks for banking

Credit and non-credit activities

Goenka College of Commerce and Business

JUSTIFICATION TO THE PROJECT

Goenka College of Commerce and Business

Stuart Matheson (2001) stated that most Microfinance Institutions (MFIs)

Goenka College of Commerce and Business

KIRKY et al. (1997)

Kirkby et al.s disaster cycle framework highlights the overlapping stages of

Another framework, the linking relief to development framework, also

ANDERSON AND WOODROW (1989)

PAUL, INSAH AND NANGPIIRE (2014)

Goenka College of Commerce and Business

OBJECTIVES OF THE STUDY

Goenka College of Commerce and Business

Goenka College of Commerce and Business

Name of the chapter

Conceptual framework/ National

Goenka College of Commerce and Business

It contains various case studies both at

Conclusions and recommendations It is inclusive of conclusions drawn from the

Goenka College of Commerce and Business

Emergency loans (relief stage);

Goenka College of Commerce and Business

Disasters generate a plethora of challenges for existing and new microfinance

Goenka College of Commerce and Business

2.) Demand-Side Opportunities

Goenka College of Commerce and Business

Listing challenges in post-disaster situations is a longer exercise than listing

Prepare their staff to predict and deal with disasters.

3.) Changes in Program Objectives

Goenka College of Commerce and Business

Goenka College of Commerce and Business

7.) Changing Demand for Services

Goenka College of Commerce and Business

Lessons in Post-Disaster Loan Forgiveness: A Case Study

Goenka College of Commerce and Business

Table no. 1 (Source: MRA)

Short- term loan

MEDIUM TERM LOAN

TABLE NO. 2 (Source: MRA)

Goenka College of Commerce and Business

Short term loan

Long term loan

FINDINGS FROM CASE STUDY NO. 1

What options have been more successful?

Goenka College of Commerce and Business

STUDY NO. 2 (Source: WOODROW, 1989.)

Cereal Banks in Burkina Faso