Disaster-resilient microfinance - Learning from communities affected by Typhoon Haiyan

This reports analyzes the economic recovery of 4,000 households in the Philippines that were badly affected by typhoon Haiyan (Yolanda) in the Philippines and recommends improvements to the role of microfinance in enhancing the financial resilience of such communities.

Microfinance is now an embedded feature of almost all low and middle income countries inextricably linked to the development of local markets and economies. These countries are often the most exposed to extreme climate events.

Microfinance Institutions (MFIs) are aware of the risks of an individual borrower and, collectively, at the portfolio level. MFIs address certain individual borrower risks with credit life insurance. While these compulsory products address some of the individual client’s needs for risk protection, there remains a shortfall in products appropriate for clients’ diverse needs. Therefore, there is a gap to be filled.

The authors argue that microinsurance products can and should be complemented by a new innovative “insurance-backed” portfolio level scheme to fund recovery lending activities following a disaster. These recovery lending activities are designed to restore livelihoods by giving short grace periods, restructured loans, and new loans to restore business assets and activities.