Don’t Panic…Prepare! 4 Steps to Disaster Preparedness and What to do when Disaster Strikes

The Gateway launches new resource on Disaster Management.

The Microfinance Gateway announces the launch of a new Hot Topic on Disaster Management. This new resource center contains an informative series of Frequently Asked Questions, a Glossary of related terms, a Web Resource Guide providing links to other useful sites on the topic, and a Recommended Reading list vetted by experts on the role of microfinance institutions in disasters.

IRIN, Humanitarian News and Analysis

Over the past several years, the microfinance industry has had to deal with its fair share of natural disasters and conflict. Though many lessons have been learned the hard way, this learning can be very helpful to other microfinance organizations as they prepare for, or are forced to react to, crises in their own communities. The Microfinance Gateway library contains over 200 publications on Natural Disasters and Microfinance in Conflict-Affected Areas, and various Microfinance Voices articles on MFI experiences in diverse disaster zones, from flooding in Pakistan and Haiti’s catastrophic earthquake of 2010 to the conflict-torn areas of Iraq.

To bring together this accumulated knowledge, the Microfinance Gateway has added Disaster Management to its list of Hot Topic resource centers. The Hot Topic was developed in collaboration with several leading experts on the topic, including Mayada El-Zoghbi (CGAP), Sasha Meunch (Mercy Corps), and Tim Nourse (Making Cents).

4 (minimum) Steps to Disaster Preparedness

1. Develop an Emergency Preparedness Plan. The importance of pre-planning cannot be underestimated. This planning becomes of utmost importance during the first three days after a disaster, when most mistakes are made.

As part of a preparedness plan, systems should be in place to protect an MFI’s assets. All physical assets should be insured. Back-ups of necessary data, systems, and power sources should be arranged through data back-up and recovery systems, holding records in secure off-site locations, and maintaining off-site backup operations of the management information system (MIS). In addition, cash holdings should be protected by keeping the majority of cash in bank accounts. Only minimum cash should be held in branch offices, stored in disaster-proof receptacles.

2. Diversify your portfolio. In order to go beyond mere survival and continue to thrive post-disaster, an MFI must also protect its financial assets. To mitigate risk of loan portfolio losses from a disaster, portfolio diversification - in terms of geography, client segments, and types of loans - is highly recommended. Offering and promoting risk-mitigating financial products, such as microinsurance and savings, can help both clients and MFIs weather the storm.

3. Maintain sufficient reserves in banks. MFIs often face a severely reduced cash flow immediately after a disaster, as loan repayments stop coming in and clients withdraw savings to cover living expenses. To mitigate liquidity risk, MFIs must maintain sufficient reserves in banks. In addition, pre-established lines of credit with banks or other sources of emergency borrowing, such as emergency liquidity facilities, are important for quick access to funds.

4. Evaluate the context in which you operate and prepare accordingly. For example, if your area is prone to frequent disasters such as seasonal flooding, a contingency fund for emergency loans is also a good idea.

What to do When Disaster Strikes

Though every disaster and MFI is different, there are some basic steps that all MFIs need to undertake immediately after a disaster:

Phase 1: Stocktaking

• Verify the scope of the disaster
• Ensure safety of staff, taking care of their needs
• Take stock of key assets (data, physical facilities, processes)
• Establish a Crisis Task Force
• Review disaster response plan, reviewing and adapting disaster policies
• Inform employees about policies and procedures
• Impact assessment – systematic examination of clients, MFI and environment
• Assess immediate cash flow situation and ensure sufficient supplies of cash to meet client and institutional needs in the near future
• Institute liquidity management, obtaining liquidity support if needed
• Portfolio management – review health of loan portfolio, setting aside sufficient reserves to cover anticipated loan losses
• Consider how the MFI can support relief efforts

Phase 2: Monitoring and analysis

• Monitor and follow up with clients
• Design product modifications (such as rescheduling, refinancing, changes in lending methodology from group-based to individual liability)
• Roll out new products (such as emergency loans, leasing and grants)

Phase 3: Focus on medium-term

• Review of product offerings for recovery – developing new products and markets as part of overall reconstruction effort
• Assess new market/client environment and redo strategic/operational plan to take into account the new environment
• Assess longer term portfolio needs and identify needed financing sources.

Want to learn more? Read the Hot Topic on Disaster Management for more tips and guidance on the role of MFIs in disasters. If we’re missing a key resource or publication on disaster management, please email us at webmaster@microfinancegatway.org.

Abigail Augusta, Microfinance Gateway Consultant
Lauren Braniff, Microfinance Gateway Editor

*First Name:		*Last Name:
Organization:
*Email Address:
*Country:	Select Afghanistan Albania Algeria Andorra Angola Antigua and Barbuda Argentina Armenia Australia Austria Azerbaijan Bahamas Bahrain Bangladesh Barbados Belarus Belgium Belize Benin Bhutan Bolivia Bosnia and Herzegovina Botswana Brazil Brunei Bulgaria Burkina Faso Burundi Cambodia Cameroon Canada Cape Verde Central African Republic Chad Chile China Colombia Comoros Congo (Brazzaville) Congo, Dem. Rep. Costa Rica Cote d'Ivoire Croatia Cuba Cyprus Czech Republic Denmark Djibouti Dominica Dominican Republic East Timor Ecuador Egypt El Salvador Equatorial Guinea Eritrea Estonia Ethiopia Fiji Finland France Gabon Gambia Georgia Germany Ghana Greece Greenland Grenada Guatemala Guinea Guinea-Bissau Guyana Haiti Honduras Hungary Iceland India Indonesia Iran Iraq Ireland Israel Italy Jamaica Japan Jordan Kazakhstan Kenya Kiribati Kosovo Kuwait Kyrgyzstan Laos Latvia Lebanon Lesotho Liberia Libya Liechtenstein Lithuania Luxembourg Macedonia Madagascar Malawi Malaysia Maldives Mali Malta Marshall Islands Mauritania Mauritius Mexico Micronesia Moldova Monaco Mongolia Morocco Mozambique Myanmar Namibia Nauru Nepal Netherlands New Zealand Nicaragua Niger Nigeria North Korea Norway Oman Pakistan Palau Panama Papua New Guinea Paraguay Peru Philippines Poland Portugal Qatar Romania Russia Rwanda Saint Kitts and Nevis Saint Lucia Saint Vincent and the Grenadines Samoa San Marino Sao Tome and Principe Saudi Arabia Senegal Serbia and Montenegro Seychelles Sierra Leone Singapore Slovakia Slovenia Solomon Islands Somalia South Africa South Korea Spain Sri Lanka Sudan Suriname Swaziland Sweden Switzerland Syria Taiwan Tajikistan Tanzania Thailand Togo Tonga Trinidad and Tobago Tunisia Turkey Turkmenistan Tuvalu Uganda Ukraine United Arab Emirates United Kingdom United States Uruguay Uzbekistan Vanuatu Vatican City Venezuela Vietnam West Bank and Gaza Yemen Zambia Zimbabwe
*Comment Title:
*Comment:
I do not want my name, email, or organization to appear with my comment. (Country will always appear with posted comments.)
By clicking "Submit" you confirm that you have read and consent to our Privacy Policy and Terms and Conditions.

Posted: 31 Jan 2012

Related Links:

Microfinance Gateway Hot Topic: Disaster Management