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UNITED NATIONS CAPITAL DEVELOPMENT FUND Microfinance |
Issue 9 / February 2005 |
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Sri Lanka’s Private Sector Responds to Help Microentrepreneurs Rebuild after the Tsunami
Report from the FieldBy J. Charitha Ratwatte, Managing Director, Sri Lanka Business Development Centre On the morning of the 26th of December 2004, the Tsunami hit Sri Lanka’s Northern, Eastern and Southern coasts. It was a Sunday, a full moon Poya day holy to the Buddhists, and the day after Christmas. It should have been a quiet, relaxing holiday with religious observances taking priority. The Tsunami killed 31,000 people in Sri Lanka and displaced half a million; 6,300 people are listed as still missing. The affected areas account for roughly 26% of the total population of Sri Lanka – most of them subsistence fishermen and microbusinessmen running small enterprises. On that day, the Sri Lanka Business Development Centre (SLBDC), a non stock, non profit, provider of business development services was meeting with the Ceylon Chamber of Commerce, the Employers Federation of Sri Lanka, the Sri Lanka Institute of Directors and the Regional and District Chambers of Commerce to partner with local microfinance institutions to prepare some programs for the UN’s International Year of Microcredit. The goal was to link the formal business sector with informal entrepreneurs and their support systems, using the Year of Microcredit as the catalyst. From December 27 th, this initiative became one driven by the Tsunami. With the collaboration of the other organizations, the Ceylon Chamber of Commerce set up a Disaster Response Center at its Head Office, and made contact with the Regional and District Chambers to assess needs. The objective was to facilitate the corporate and organized business sector in assisting the government officials who were managing Welfare Centers for Internally Displaced People. A large number of corporates responded; some even adopted Welfare Centers and began running them directly. As the initial relief stage passed, and recovery became the priority, the government set up a number of Task Forces to handle Rehabilitation and Reconstruction; private sector businessmen were appointed to key positions. Microentrepreneurs have been made a priority in these efforts, as the area which was devastated by the Tsunami is the cradle of entrepreneurial culture in the country. Over and above the fishing industry, businessmen from the coastal areas have penetrated all over Sri Lanka and been the entrepreneurial engine of growth. Indeed, businessmen from this coastal zone have ventured as far a-field as Singapore, Hong Kong and Dubai. Representatives from the SLBDC and the Ceylon Chamber of Commerce visited the Tsunami- affected areas and established contact with over 50 microfinance institutions. We assessed the situation they were in and obtained the support of Germany’s GTZ to finance a survey of their actual needs, which is in progress. In order to kick start the local microeconomy, the SLBDC and its collaborators also quickly got together a proposal aimed at providing immediate, targeted, fast-acting assistance to the microentrepreneur community through these MFIs. The project was designed to provide 2,000 microentrepreneurs in each Tsunami affected-district (a total of 10 districts) with a combined grant and soft loan package, which would allow them to immediately resume their businesses. These businessmen are the well-documented “bottom of the pyramid “ entrepreneurs; they play a vital role in the retail networks and the wholesale collection and distribution system in the affected areas. Unless they resume business, nothing will happen in economic recovery terms beyond hand-outs – and while there has been much talk of this type of aid, a senior government spokesman admitted on the 2 nd of February that only 30% of the affected families had received the relief assistance they were entitled to. The proposal, which is now being studied by the donor community (the World Bank, the Asian Development Bank, the Japan Bank for International Cooperation and the bi-lateral donors), is to constitute the Livelihood Program of the Emergency Recovery Loan being designed by the International Development Association of the World Bank. It will provide qualified Tsunami-affected individuals with loans or grants (or both) to help them resume business operations interrupted by the disaster, or to create new businesses. The program will also provide business services and training. Loans will be administered via qualified MFIs, and loan repayments will be added to the revolving funds of the MFIs. Grants to microenterprises will be handled through a separate channel to distinguish them from the loans, which have to be repaid. The grants will be equal to all borrowers. Providing grants will boost the creditworthiness of individuals left with little or no assets after the Tsunami. Eligibility for loans is based on membership in a participating MFI, and residency in tsunami-affected area. The MFI will select borrowers based on their own client assessments and criteria. The participating MFIs will be selected very carefully, based on their financial standing, past performance, presence on the ground and range of services offered. The training and business services provided by the proposed program would include: how to start up a business, preparing a business plan, marketing and procurement, and technical advice on running a business. There will be an apex, national-level central project management unit, in which private sector organizations such as the Ceylon Chamber of Commerce, the Employers Federation, the Institute of Directors and the SLBDC will play an important role, together with governmental and donor representatives. There will also be a project management unit at the administrative district level in which the district and regional chambers will play a role. This program is primarily a business development program for Tsunami-affected entrepreneurs, and persons affected by the Tsunami who see a new business opportunity. It must therefore be implemented by the business community and not the bureaucracy. Most of all, this program requires quick implementation. The survey of the existing affected MFIs was to be completed in the second week in February. It is now, at the time of writing, a month and seven days since the Tsunami: we have to get moving. To pilot the model, the Ceylon Chamber of Commerce is prepared to provide some donations received by the Chamber for Tsunami recovery activities to implement the scheme in a few selected districts. This will help us to fine tune the model, as the donor community gets its act together and the proposed Emergency Recovery Loan is operationalized.
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