Microfinance and Disasters: all is not lost when they’ve lost everything

by Ben Warren

In the kaleidoscopic world of microfinance, it’s often easy to lose focus on the bright lights emerging in the margins. Anyone tracking the progress of the industry during the past few years will have grappled with a spectrum of negative reports; however, this shouldn’t detract from the sectors’ positive progression towards microfinance 2.0.

Kubaru launched in 2012 to help address the gap in provision of post-disaster microfinance funding. Our mission is to help support the most vulnerable and marginalised borrowers around the world. We do this via a donation-based crowdfunding model on our online lending platform at Kubaru.org, supported by field partners in Burkina Faso and the Philippines.

Microfinance Institutions (MFI) often experience a ‘liquidity crunch’ in the wake of a disaster: when clients’ appetite for borrowing increases, at the same time as repayments from the existing loan book dry up. During this time, it is important for a MFI to have access to additional capital to on-lend to the disaster-affected communities, thus playing an important role in stimulating entrepreneurship in the local economy. The risk in post-disaster environments is that without adequately capitalised MFIs, borrowers are forced to choose expensive, unregulated moneylenders instead.

It is these borrowers that Kubaru is seeking to support. We support entrepreneurs in three types of post-disaster environments: i) Natural Disaster – such as an earthquake, typhoon or flood, ii) Man-made – such as a civil or regional conflict, or iii) Slow Onset – such as a drought or famine. These shocks can affect the financial management of a household in the following ways:

1. Cause temporarily inability to earn income

2. Increase basic expenditure

3. Damage income-generating assets

4. Damage household assets

We aspire to work with socially motivated MFIs across the world to help provide entrepreneurs with the finance that they need to mitigate these effects, and we are exploring innovative approaches to work with other microfinance savings and insurance products to help increase the offering.

This isn’t an easy problem to tackle for a small organisation like ours, however by retaining our focus on borrower-centric design, we are determined to continue working in partnership with quality MFIs and seeking support from the sector to make this happen.

Fault lines in the microfinance sector have been magnified over the past few years but at Kubaru we’d like to keep the focus on innovation and progression. We hope you can join to support us as we form our approach – we’d love to hear from you.

Ben Warren is CEO/Founder at Kubaru Microfinance. Kubaru is a London-based charity, working with field partners in the Philippines and Burkina Faso in communities prone to natural and man-made disasters. Alongside running Kubaru, Ben works as a Social Investment and Finance Policy Adviser at the Cabinet Office where he leads work on open data, impact measurement and engagement with individual investors. Ben’s background is in investment management and he has previously worked as an Investment Analyst at the Social Investment Business Group, the UK’s largest social investor. Ben holds a MSc in International Development and Security.

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