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May 27, 2005
Microfinance and Donor-Advised Fund Provide Tsunami Relief
    by William Baue

A Grameen Foundation USA report examines barriers and opportunities for using microfinance as tsunami relief, and the Calvert Foundation funnels donations to tsunami-ravaged Sri Lanka.


Mrs. Norwati survived the Indian Ocean tsunami that hit her homeland of Indonesia on December 26, 2004 by sailing a mattress like a boat on the massive waves. She and her 19-year old son were among the 1.6 million people displaced by the tsunami, but her husband was among the 220,000 killed. In the wake of the ebbing water, she set up shop again at a food stall selling breakfast foods--such as nasi pagi (fried fish) and daging (beef)--cooked with utensils bought on borrowed and donated capital. Her microenterprise makes between $8 and $11 a day, but she yearns for a microloan to boost her business.

Microfinance
and Donor-Advised Fund Provide Tsunami Relief


Unfortunately, microfinance is in short supply in tsunami-ravaged regions, despite its proven efficacy at poverty alleviation and disaster relief. So says a report issued yesterday, the tsunami's five-month anniversary, by the Grameen Foundation USA (GFUSA) at a conference it cosponsored with the Third Millennium Foundation at the International Center for Tolerance in Brooklyn, New York. The report, based on research by GFUSA's Tsunami Assessment Team in four of the hardest-hit countries (India, Indonesia, Sri Lanka, and Thailand) from February through April 2005, identifies 11 organizations poised to provide microfinance but currently lacking funds to do so.

"The tsunami devastated local economies and wiped out tiny businesses that had enabled many families to live above the poverty level before this natural disaster," said Alex Counts, president of GFUSA. "Our report concludes that microcredit--small loans ranging from just $50 to $400 for entrepreneurial individuals--could have a dramatic impact in restoring hope and economic promise for thousands of families in Indonesia, Sri Lanka, India and Thailand."

Specifically, the report estimates that 57,000 families (numbering 288,000 people in total) could benefit from the 11 microfinance projects at a total cost of $17.76 million over three years, or just $62 per person. In fact, the economic impact would spread even further, as about 50 percent of the financing would come in the form of microloans that, when repaid, could be re-deployed in the form of new loans.

The report breaks down the team findings by the four countries visited starting with the hardest-hit, the Aceh province of Indonesia, which experienced losses and damages amounting to 97 percent of its gross domestic product (GDP). Although more than 100 nongovernmental organizations (NGOs) operated in Aceh before the tsunami, only three provided microfinance, creating significant challenges for identifying potential implementers of post-tsunami microfinance initiatives.

The team singled out five candidates: Save Emergency for Aceh (SEFA), Center for Aid in Resolving Aceh (CARE), Rumoh Kita, Yayasan Mitra Dhuafa (YAMIDA), and Yayasan Kariya Bunda Sejahtera (YKBS). The report lists recommendations for implementing microfinance initiatives that include deviations from standard microfinance best practice in light of the unique post-tsunami situation.

The Grameen-Abdul Latif Jameel Initiative, originally established to advance microfinance in Arab regions, not only supported the report but also committed $1 million toward the implementation of report recommendations. The UK-based Northern Rock Foundation, which had no previous relationship with GFUSA, committed $184,000 to recommendation implementation as well.

GFUSA intended the report to guide tsunami relief efforts beyond its own efforts. Even before the report's release, the Calvert Social Investment Foundation announced its collaboration with Patrick Mendis, a former US diplomat born in Sri Lanka, to funnel investments from the Calvert Giving Fund to tsunami relief. The Calvert Giving Fund is a donor-advised fund service that allows investors to make tax-deductible contributions to the Calvert Foundation of $5,000 or more, which compounds tax-free interest until the donor designates a charity.

Dr. Mendis set up the Tsunami Leaders Caring (TLC) Foundation under the umbrella of Sarvodaya, a 50 year-old "Shramadana" (sharing of labor) organization that provides aid to the poorest Sri Lankans, to support youth leadership in tackling post-tsunami problems. TLC Foundation leadership awards can be used to learn English, develop new skills, or for on-the-job trainging with a mentor. Dr. Mendis himself grew up working on a three-acre rice field with 13 water buffalo at a Sarvodaya "Shramadana" camp, an experience that inculcated a sense of social responsibility. The Calvert Giving Fund-TLC Foundation initiative seeks to spread this sense of social responsibility to the next generation of Sri Lankan youth, who must take up the yoke of rebuilding the tsunami-ravaged country.

 

 
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