Microfinance for Disaster Risk Management in Bangladesh

This case study describes MFIs' response to the Bangladeshi floods in 1998. It looks at the impact of microfinance in response to floods, and lists factors that limit MFIs role in disaster response and mitigation.

Bangladesh experienced the worst floods in its history from July to September 1998. Bangladeshi MFIs responded by providing innovative financial services. These included:

• MFIs allowed members to withdraw savings;
• Grameen Bank opened access to compulsory savings accounts in an attempt to reduce the decline of household incomes;
• Bangladeshi Rural Advancement committee (BRAC) operated disaster-related deposits, which allowed members to keep their assets safe from damage due to floods;
• BURO Tangail, the Association for Social Advancement, SafeSave and others provided voluntary savings facilities to their members;
• MIs rescheduled loan repayments, permitting members to delay repayments on existing loans;
• MFIs also provided quick disbursal loans to help members address their immediate relief and consumption needs.

The success of MFI intervention was due to capable leadership, committed staff, sound management and financial practices. Finally, the paper suggests that microfinance also has the potential of supporting ex ante mitigation measures to contribute to better disaster preparedness.