Coping with Natural Disasters: How microfinance can help mitigate the consequences
A set of guidelines produced by UNCDF and World Bank
Whether faced with the effects of tsunamis, earthquakes or hurricanes, the poor worldwide struggle with the consequences of natural disasters. These disasters increase the vulnerability among the poor by putting their property, health and their lives in danger. Research shows that when disaster strikes, the poor are not only in a greater danger of falling victim, but suffer relatively more loss than the average population.
Microfinance Institutions (MFIs) serve poor and vulnerable populations, enabling them to reach large numbers of clients. Since MFIs target the poor, they work with high-risk populations. As clients’ repayment capacity declines, an MFI’s portfolio quality and liquidity situation position are also put at risk. In the event of a natural disaster, both the MFI and its clients can become vulnerable.
The majority of MFIs face numerous challenges to develop the institutional capacity, client-responsive products, and business models to offer services on a sustainable basis. Rarely is this goal more threatened than in times of upheaval such as natural disasters.
Experiences of several MFIs in disaster-prone areas, however, have demonstrated that access to microfinance services can support disaster preparedness and risk reduction by decreasing client vulnerability. When clients have access to needed financial services during crisis situations, the impact of the disaster may considerably lessen. Provision of financial services during a crisis, however, is only possible if an MFI is prepared. An unprepared MFI may not only fail to protect its clients, but puts its own survival at risk. Since incidence of natural disaster is on the rise globally, many institutions have identified the need to prepare for this possibility for their own and their clients’ well being.
In addressing these issues, the United Nations Capital Development Fund has partnered with the World Bank’s Hazard Management Unit (HMU) to develop mechanisms for poor households and communities to better manage disaster risk by accessing financial services. The initiative has produced a set of guidelines: Surviving Disasters and Supporting Recovery: A Guidebook for Microfinance Institutions.
Though UNCDF and the World Bank coordinated the effort, the cooperation, assistance and material contributions of several different organizations allowed for the collection of tools and resources available in this guide, including the UN Development Programme, Community, Habitat and Finance
Download full report: 
Links
World Bank's Hazard Management Unit: http://www.worldbank.org/hazards/
