Families devastated by what is predicted to be particularly severe El Niño weather patterns in six African countries are to benefit from small loans to rebuild their livelihoods, following a £2 million ‘returnable grant’ from the UK Government to aid agency World Vision UK and its microfinance partner, VisionFund International.
With anticipated drought in West and Southern Africa and potentially severe flooding in East Africa, VisionFund will use the funds to provide additional resources to its MFIs in Kenya, Uganda, Rwanda, Tanzania, Malawi and Mali in order for them to issue recovery loans to their clients. These loans will be targeted at suitable individuals affected by El Niño, and may be larger and over a longer period than typical microfinance lending. The loans are to help rebuild businesses destroyed by flooding and drought in order to restore economic independence to families, and provide economic stimulus to communities, as quickly as possible.
It is anticipated that VisionFund’s recovery loans will help restore the livelihoods of around 18,000 families, impacting approximately 40,000 children. The UK Government has granted additional funds of £200,000 to manage and measure the project’s impact and capture learnings for the industry on the role of microfinance in disaster response.
In appropriate contexts, recovery lending can complement traditional humanitarian assistance as it focuses on specific economic groups within the community. World Vision and VisionFund will work closely together to ensure that Vision Fund’s recovery lending approach is closely aligned and integrated with World Vision’s immediate humanitarian response. Once individuals are ready to rebuild their businesses or start entrepreneurial activities, they may apply to VisionFund’s MFIs for a recovery loan. It is another tool to help communities recover and VisionFund ensures that any financial risk has been properly assessed for those who receive a loan.
VisionFund pioneered recovery lending on a smaller scale in the Philippines with great success. In the aftermath of Typhoon Haiyan, VisionFund issued over 4,600 recovery loans and 96 percent of clients surveyed stated that the loans were helpful in restoring livelihoods with 49 percent saying they had fully recovered as a result of the loans.
Mr Scott Brown, VisionFund International’s President and Chief Executive Officer, explains: “This ‘hand up’ rather than ‘hand out’ approach empowers individuals to recreate their livelihoods and restore independence. From a financial perspective, it can reduce the amount of grant aid needed to help communities recover economically while additionally attracting commercial funding to allow greater scale in the recovery response.”
Mr Mark Bulpitt, Head of Humanitarian and Resilience Team, World Vision UK, said: “Recovery lending enables families to get back on their feet. We see tremendous opportunity for microfinance networks to integrate more with humanitarian organisations to help us provide an even more robust response to disasters.”