Pre-Disaster Planning to Protect Microfinance Clients

Topic :

This brief discusses techniques to prepare a microfinance client for a natural disaster. it highlights that the majority of microfinance clients hit by natural disasters have loans outstanding that they may have used for many purposes, ranging from petty trading, home improvements, livestock, agricultural activities, school fees, medical bills, or previous family emergencies. But when natural disasters strike, clients lose family members, health, homes, business assets, inventories, livestock, and crops—exactly those things in which they had invested loan capital.

Still indebted to the microfinance institution (MFI), clients lose assets or income-earning activities by which means they repay MFI debts. At the same moment, clients require emergency funds to buy food or medicine. Clients with the smallest liquid assets and the greatest loss of income or assets may cope by going deeper into debt, pulling children out of school; selling off their remaining assets, crops, and livestock; and, in extreme cases, dividing the family as adults migrate in search of work.

The brief sets out and discusses eight steps that MFIs can take to mitigate the effect of a sudden natural disaster on their clientele:

  1. Meet with Clients to Discuss Natural Disasters
  2. Create Accessible Emergency Funds
  3. Health Training and Vaccination Programs
  4. Support Economic Diversification
  5. Encourage Structurally Sound Housing
  6. Consider Insurance Products that Respond to Aggregate Crises
  7. Locate Relief Services to Use in Case of Disaster
  8. Collect and Disseminate Early Warning Information to Clients

The brief concludes by noting that clearly these eight techniques cannot protect clients from unexpected natural disasters. They can, however, reduce the loss of life and improve the health of clients and their families, protect household and business assets, and empower clients and their communities to prepare for and react to a sudden disaster.

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