Microfinance and Disasters: Preparing for the Worst

This note discusses how MFIs and their staff can prepare and respond to natural disasters.

Disaster preparedness includes understanding risks and costs of disasters, establishing proactive approaches and concrete responses, and knowing resources and partnerships that may prove helpful in an emergency. MFIs can be important partners in disaster preparation and post-disaster recovery efforts because of their systems, products and relationships with low-income community leaders and microbusinesses. The paper states that MFIs should:

• Develop a contingency plan for disasters that deals with communication during and after the disaster, and clarifies changes in internal policies;
• Ensure adequate pre-disaster communication by discussing disaster policies and practices at client orientations;
• Build up a disaster recovery reserve fund that can be used for clients or for the MFI;
• Train branch offices in responding to requests for emergency loans by clients and others in affected areas.
• Coordinate with other MFIs, government agencies, municipal authorities and donors to develop strong partnerships for disaster response.

Some effective responses to disasters include new types of loan products, adjustments to conditions for outstanding loans, and changes in delivery methodologies.