Microfinance and Tsunami Recovery
Some bad practices ...

In hindsight, some of the misconceptions of microfinance in the affected countries became clear, key among them being the disbursement of emergency relief through MFIs. Funds provided to MFIs to be loaned to affected communities were subsidized far below market rates.

Many international donors targeted the same MFIs creating an unbalanced distribution of funds among the affected areas. The pressure on MFIs to quickly disburse funds was also quite unrealistic, considering their capacities and reach.

Lack of understanding of microfinance, of its potentials and limitations among international NGOs was also citied as an area that needed improvement. They also cited the problems they faced as a result of mixing grants and loans, and of mixing microfinance with the development and implementation of livelihood projects.

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Hari Srinivas - hsrinivas@gdrc.org
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