Recovery from the Tsunami Disaster: Poverty Reduction and Sustainable Development through Microfinance

This paper discusses opportunities for microfinance to aid the poor in recovering from the effects of the Tsunami disaster.

A research was carried out with the following methodology:

• A team of microfinance experts studied the effects of the tsunami in the four worst affected countries: Indonesia, India, Sri Lanka and Thailand;
• They assessed conditions facing the poor and the effects of the disaster on the provision of microfinance;
• The team also helped develop response plans of regional microfinance institutions (MFIs).

The team found that:

• MFIs and non-governmental organizations (NGOs) were prepared to step up their microcredit activities in the affected areas but needed support;
• Many MFIs had feasible projects that could be implemented if the resources were made available;
• There existed an opportunity for microfinance to reach its full potential as a tsunami-response approach and to develop capacity and knowledge for responding to future regional disasters.

The paper then presents a detailed report on the following in the four selected countries:

• Conditions of the poor;
• Conditions of microfinance;
• Opportunities for impact;
• The approach to be followed.

The team recommended that:

• More than half the funds required should be provided as interest free-or low-interest loans to the MFIs;
• At least 50% or more of this would be repaid and made available for deployment for other disaster response or other microfinance or development programs in the future.