Financial Times

Micro financing options in crisis situations
By Quintus Perera
Micro-finance loan schemes offered by Hatton National Bank (HNB) for small and medium enterprises have had a remarkable success rate, R. Thiagarajah, HNB’s General Manager/CEO said.

He described HNB's success story in dealing with rural farmers and extending them financial facilities to sustain their industries and cultivations at a recent seminar on micro finance options in crisis situations.
Over the last 15 years, HNB has built up and improved its role in developing and distributing micro financing.

This scheme covers 75,000 SMEs with a recovery rate of 97 percent and is considered as a very essential link in enhancing the economic prosperity of the villager, Thiagarajah said.

He was speaking at the Pan Asia Forum on Micro Finance in Crisis Situations, organized by The Foundation for Development Cooperation (FDC), a member of the Banking with the Poor Network based in Brisbane, Australia.

Representatives from the government, private sector and NGOs have joined forces to promote small scale lending and insurance schemes for reconstruction and recovery in crisis situations.

The forum gave an opportunity for a group of experts from countries in the region to draw on experience within and beyond the region to increase access to financial services in order to accelerate reconstruction and recovery following natural disasters and in conflict situations and HIV/AIDS affected communities.

Stuart Mathison, Programme Manager, Information and Communication for Development said that crisis situations arise from natural disasters like tsunamis, floods, typhoons, hurricanes, droughts and also man-made disasters like conflicts and war and calamities like the HIV/AIDS epidemic. "It is imperative we learn more lessons to develop policies and strategies to cope with disasters,” he said.

Mathison said that capacity building was the primary objective of the forum. It helped to identify capacity building needs and training gaps and to design a regional capacity building programme.

He said that the HIV/AIDS crisis is deadlier than the tsunami. In each of these contexts micro finance services should be afforded to the affected people.
Better management practices should be adopted and overlapping issues and responses should be understood. Lessons learnt from one crisis could be applied for the other.

Poor people are more vulnerable to crisis situations, Mathison said.
Consequently, micro finance institutions (MFIs) need policy strategies and products to help reduce such vulnerability.

Micro enterprise development and risk management protecting client income and assets should be in place and MFIs are needed by communities impacted by natural disasters.

Mathison said that the Asian context is different from the African context and that there should be strategic projects to rebuild a community’s economy and to have linkages to micro enterprise development through MFIs.

Riza Primachendra Bina Swadaya from Indonesia who has experience in Banda Aceh spoke on micro finance as an instrument to cope with crisis with emphasis on Banda Aceh and the tsunami.

He said the tsunami destroyed large areas including a number of towns in Aceh Province, rendering around 600,000 people homeless with around 200,000 losing their lives.

He said that Aceh was a conflict ridden area and the area was considered closed by the government as well as the armed forces for about 40 years.
At first the NGOs who came to help could not work freely as there were so many issues raised by politicians.

But the government because of the magnitude of the disaster and the suffering of the people, adopted an open policy allowing a free flow of assistance.

There were good practices on humanitarian grounds with relief operations and financial assistance going on quite well for the benefit of the affected people.
There were no interferences to prevent humanitarian assistance, he said.
He said that people in fact did not care for the issues of religious ideologies.
He said that even in the sphere of housing Indonesians have accepted foreign aid rather than depending on the government funds.

He said that the majority in Aceh are Muslims and there are Muslim financial institutions in rural areas. But when the people found the other informal lending organizations were cheaper they moved there, to such an extent that the Islamic banks collapsed.

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