Microfinance Donors: Preparing for Natural Disaster

In order that donors may respond most effectively to rapid-onset natural disasters faced by MFIs, they require good information and thoughtful policies. This technical brief outlines four ways in which donors can take appropriate action both before and during critical times of crisis for MFIs:

• Even in the face of disaster, promote microfinance sound practices. This includes not asking MFIs to forgive loans, or pressuring them to act as social safety nets for communities;
• Prepare a Natural Disaster Response Policy for MFIs. Clear policies including terms and conditions for disbursements of disaster funds and a standard format are essential for when a crisis hits;
• Provide Disaster Preparation Support to the MFI Industry. Donors can invest in preparedness activities such as early warning systems, duplicate records safekeeping, or staff training;
• Develop a Consensus on Disaster Response in the Microfinance Industry. Topics for discussion include appropriate reserve requirements and the support and management of disaster loan funds.

Overall, policy dialogue on these four points should take place on an ongoing basis, not just during and following large disasters.