Keya Sarkar: Micro finance in disaster control

OUT OF FOCUS

The problem that had erupted in the Krishna district of Andhra Pradesh between the district authorities and micro finance companies seems to have calmed down over the last few weeks. While the closure of 55 branches of micro finance organisations by the district administrator was most unfortunate, I must say, in the longer run, it has done micro finance companies a singular favour. Companies which were merely conducting their business, concentrating on lending and recovery, suddenly realised how vulnerable they were unless they actively managed the environment.

Thanks to the incident in the Krishna district, almost all MFIs at the state level and at the national level have realised the need a) for greater dialogue among themselves, and b) the absolute necessity for keeping local authorities and the state governments in the picture about why and how they are doing business.

Against this backdrop of micro finance practitioners getting suddenly unsure of political patronage of their business, I was surprised to receive an invitation from the National Disaster Management Authority (NDMA), government of India, for a "Preliminary meeting on Micro Finance" to be held in New Delhi on August 3. Others invited were mostly CEOs of some of the larger finance companies, the joint secretary (B&I), ministry of finance; secretary, Sadhan, the national micro finance association; and H R Khan, CGM and Principal, College of Agricultural Banking.

The meeting, chaired by M Shashidhar Reddy (MLA, Andhra Pradesh), member, NDMA, was for me an eye opener. First, it was good to know that the NDMA, set up only last year, is a body that can focus exclusively on disaster management, as opposed to the earlier dispensation, when disaster management was the prerogative of the already over-burdened home ministry.

And secondly, it was also good to learn that the government, at the national level, seriously considers micro finance to be a tool to reduce vulnerabilities of the poor and therefore effective in overcoming disasters. In fact, Khan, who has worked extensively on how micro finance companies can enhance the delivery capability of banks, had already, as early as May this year, made a presentation to the NDMA on "Micro finance and Disaster Management".

While Khan's presentation provided a theoretical and academic background, the meeting early this month brought together practitioners who could flesh out in practical terms the suggestions made by Khan.

What was really useful to the group was also a brief presentation by the minister on trends in natural disasters globally and in India over the last 25 years. Taking into account only major disasters like earthquakes, cyclones and floods in the last 15 years, the cumulative loss would be over 120,000 lives and property worth Rs 150,000 crore.

With a mapping of the more disaster-prone areas, the NDMA is trying to achieve a national co-ordination of all agencies, government or otherwise, in order to ensure a level of preparedness for disaster. As Reddy specified, it is in reducing the vulnerabilities of the poor that the MFIs can play a huge role. Since agriculture and rural credit by their very nature are fraught with risk, MFIs have developed capabilities to tackle such risks through

savings products and annuities

micro insurance products: life, non-life including weather-linked insurance

supporting diversified livelihood so that the risk of over-dependence on a single activity is reduced

Since the group was small and Reddy very focused on the task at hand, the progress made was considerable in drawing up a list of issues that needed to be examined at length so that micro finance may best serve as a tool in the hands of all related agencies in reducing some of the pain of disaster-hit areas.

Based on the discussions at the preliminary meeting on micro finance, Reddy set September 4 as the date for a meeting of all potential participants to discuss a way of co-ordination and co-operation. The list of all agencies required to meet includes government organisations like the RBI, IRDA, NABARD, the central ministries of home, finance and rural development as well as state representatives from some of the more disaster-prone states, donor or relief agencies, MFIs/NGOs, banks, insurance companies, both corporate and MFI networks and international organisations with experience in disaster management.