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| For Immediate Release | |||
| A Joint Statement: Beyond Survival - From Tsunami Relief to Recovery | |||
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Jeanette Thomas The tsunami in Asia has prompted a heartwarming response and a global outpouring of money pledged to rebuild homes, schools, hospitals, and livelihoods. But when it comes to moving beyond the basics of shelter and income, people also need a broad range of financial services, not grants alone. So microfinance programs will also play a critical role. As both international relief agencies and microfinance practitioners most of whom work in tsunami-affected areas, we are committed to best practice in both relief and long-term development. That is why we are calling on the many donors, organizations, and individuals who share our commitment to take great care not to confuse the relief activities of today with the long-term economic development of tsunami-affected areas. We therefore commit to the following principles: Microfinance institutions best serve their communities by providing long-term access to sustainable financial services. Although it was necessary in the immediate aftermath of the tsunami for many microfinance institutions to engage in relief efforts, using MFIs as conduits for long-term relief and livelihoods grants sends mixed signals to clients and threatens credit discipline. Grants can be vital for emergency safety nets. Grants can also help prepare people without income or livelihood for the eventual use of financial services. But they should not be administered in a way that threatens the development of markets and the opportunities markets can create for poor people. Therefore agencies delivering grants and institutions offering loans must co-ordinate to ensure that the two mechanisms work together rather than against each other in helping people to get back on their feet. Grants and loans play complementary roles in restoring livelihoods. But whenever possible, those organizations delivering grants should not also be delivering credit. It sends confusing messages to clients if they are asked to pay back loans to the same organization that previously gave away grants. Concessionary loans can have serious negative consequences and undermine fragile financial systems for the poor. In order to create the environment in which microfinance will contribute to long-term recovery, microfinance institutions need to focus on the business of providing financial services at market rates. Maintaining discipline in loan repayments is key to providing permanent access to financial services: failure to repay loans destroys the financial environment and ultimately undermines the mission of microfinance institutions. Microfinance should not focus only on credit. Microfinance institutions need to design and offer a whole range of services, especially savings and insurance, in addition to loans that help build long term productive assets through micro leasing, housing finance and other innovative products that are designed to meet the real needs of clients. New tailored products may be needed to better serve clients in the changed environment. We encourage microfinance networks and relief agencies to support this appeal. |