By The Women’s Refugee Commission, May 2009, 36 pages, available at: http://www.womensrefugeecommission.org/docs/livelihoods_manual.pdf
This report describes the benefits of providing microfinance programs to displaced people as well as the potential mistakes of poorly planned interventions. It also recommends ways of including age-, gender-, ability- and conflict-sensitive approaches in such microfinance programs. Finally, it provides resources for developing interventions, mapping the needs of a targeted population and creating guidelines for monitoring and evaluation. This summary focuses on the “Microfinance Interventions” chapter of the report, which is part of the livelihood interventions section of the report. The two other sections of the manual are: non-intervention guidance and “Tools and Approaches”.
A case study of the American Refugee Committee, which provided loans to Liberian and Sierra Leonean refugees in Guinea and Liberia, Sudanese refugees in northern Uganda, and Burmese refugees in Thailand, indicates that serving displaced people allows them to create a positive credit history that can facilitate the use of microfinance services from linked providers in the area of return. Concern Worldwide, an Ireland-based agency working with displacement populations reportedly cites underfunding and rushing into design and planning as the main causes of failures for microfinance interventions in war-affected areas. Other potential shortcomings of microfinance interventions include a lack of well-defined client selection criteria and the provision of microfinance and relief programs by the same organization without using separate branding.
The report indicates that in order to determine the suitability of microfinance interventions in post-conflict environments there should be a certain degree of political and economic stability, a manageable inflation rate, a fairly stable client population and preexisting economic activities that can benefit from credit services.
The authors suggest conducting thorough market research before taking any action. Microfinance interventions are inappropriate as a first response, when basic human needs are unsatisfied. They are also not suitable if services for a similar target group are already in place, when grants are provided in place of microfinance intervention or if laws of the host country bans participation of the displaced population in market activities. The authors argue that poorly prepared programs discredit the concept of providing refugees with microfinance services resulting in the reduction of donor funding. Organizations should therefore ensure that they possess necessary expertise before implementing an intervention.
The US government’s Agency for International Development suggests the following five rules for lending in post-conflict areas: offer services that meet the needs of microentrepeneurs, reduce costs by streamlining operations, use motivational tools for timely repayments, charge full-cost interest rates and fees, and achieve sustainability through economies of scale. When designing a microfinance program, the authors argue that an organization needs to take local context into account, be responsive to the various stages of client life cycle and follow a “Do No Harm” methodology. Sex, age and disability should not disqualify individuals as clients. Instead, programs should be tailored to address the different needs of particular sub-groups within the targeted population. For example, the report introduces approaches for implementing group savings and credit products for clients affected with HIV/AIDS.
The authors argue that saving services are preferred over credit in conflict-affected areas, especially by women and youth. Business loans and microinsurance products can also be beneficial as long as they are designed to fit the circumstances of displaced communities. For example, short-term business loans and life insurance may be relatively successful.
The authors recommend ongoing program monitoring including measuring the demand for different products as they may shift over time. Monitoring can also help in addressing unintended program results such as increased stress among female participants due to additional responsibilities and gender-based violence due to reversals of roles in income generation. The authors warn that targeting women and youth cannot ensure bringing about economic and social empowerment. Above portfolio size and repayment rates, organizations should assess the impact on households and individuals in terms of access to health, education, nutrition, water and sanitation as well as other factors such as the preparation of displaced people for repatriation.
By Emilia Akonom, Research Associate
Sources and Additional Resources:
Building Livelihoods. A Field Manual for Practitioners in Humanitarian Settings – Microfinance Interventions, Pages 152-188 http://www.womensrefugeecommission.org/docs/livelihoods_manual.pdf
MicroCapital.org story, May 17, 2010, MICROCAPITAL BRIEF: Dr John Hatch, Founder of FINCA International, Discusses the Role of Microfinance in Disaster and Conflict Zones https://www.microcapital.org/microcapital-brief-dr-john-hatch-founder-of-finca-international-discusses-the-role-of-microfinance-in-disaster-and-conflict-zones/
MicroCapital.org story, February 4, 2009, MICROFINANCE PAPER WRAP-UP: Beyond Economic Benefits: The Contribution of Microfinance to Post-Conflict Recovery in Asia and the Pacific https://www.microcapital.org/microfinance-paper-wrap-up-beyond-economic-benefits-the-contribution-of-microfinance-to-post-conflict-recovery-in-asia-and-the-pacific-by-pascal-marino/
MicroCapital.org story, February 3, 2009, MICROCAPITAL STORY: International Symposium on Microfinance as a Tool for Peacebuilding Discusses Rebuilding the Social and Economic Fabric in Post-Conflict Areas of Colombia through Microcredit https://www.microcapital.org/microcapital-story-international-symposium-on-microfinance-as-a-tool-for-peacebuilding-discusses-rebuilding-the-social-and-economic-fabric-in-post-conflict-areas-of-cambodia-through-microcredit/
MicroCapital.org story, January 20, 2009, MICROCAPITAL STORY: The International Federation of Red Cross and Red Crescent Societies (IFRC) Cites Lack of Loans and Financial Services as Main Obstacles in Bringing Lasting Benefits to Tsunami Victims in Sri Lanka https://www.microcapital.org/microcapital-story-the-international-federation-of-red-cross-and-red-crescent-societies-ifrc-cites-lack-of-loans-and-financial-services-cited-as-main-obstacles-in-bringing-lasting-benefits-to-tsuna/
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