Disaster Microcredit: A Mechanism for Recovery

This report documents a study on the potential of microcredit as a disaster relief tool. The study surveyed available literature and interviewed professionals in related fields. It identifies both challenges and benefits of microcredit as well as the types of businesses most likely to be aided by a microcredit system.

The small business community are typically the hardest hit by disasters. Microcredit has not been widely used in the developed world and has rarely been used for disaster relief. The paper proposes that microcredit could be a good disaster relief mechanism. It states that:

• Challenges to the use of microcredit in disaster relief includes the need to identify prerequisites to microcredit success and uncertainty associated in using microcredit;
• Businesses that are more likely to recover quickly are those that are highly mobile and that provide goods that will be in high demand after a disaster;
• Small businesses will need cash flow, access to markets, training, infrastructure, security and information about microcredit.

The study concludes that microcredit is a viable option for disaster relief. Microfinance will need to develop a sense of regional loyalty that results in business retention in order to become a successful disaster relief tool.