SUMMER INTERNSHIP REPORT

ON

Post-Tsunami, Economic Rehabilitation

Initiative for Fishermen Community in
Tamil Nadu and Sri Lanka

Name of organization: PlaNet Finance India.

Author: Anshul Goel

Institution: ICFAI Business School, Gurgaon
 Acknowledgement

I would like to thank Mr. Shivendra Sharma, Executive Director, PlaNet Finance India
for his great mentorship. He has helped me understand this arena of finance. He showed
full confidence in me and entrusted me with this task. I also thank all my colleagues of
PlaNet Finance India, for their support.

I ‘m grateful to Dr. Naresh Singh for his able guidance. Sir, you are living example of
what all is said well about teachers in any language and culture.

Mr. Alegesan and his team at CRED, Mr. Solomon and his team at DPG, Mr.Charles and
Mr. Olivie of PlaNet Finance Paris for they were a real strength behind my effort and
helped me successfully study the situation.

I thank my parents for believing in me.

Anshul Goel
04BS0324
ICFAI BUSINESS SCHOOL
GURGAON
Content index

Executive Summary 1
Project Objectives 3
Expected Output 5
Methodology 8
Observations 12
Tsunami’s impact 14
Disaster 17
Disaster preparedness of MFIs 21
Involvement in other activities of PlaNetFinance India. 26
Conclusions and Recommendations 27
References 29
Appendix 33
Executive Summary

Whenever disaster strikes, first thing that comes in question is survival and only later the
question of sustenance arises. 26th December morning was last for some people but will
have lasting and irreparable impact on most of the people who survived. The setting is a
small village of 650 fisherman families on the coast of Tamil Nadu in India, Seruthur
which suffered heavy losses on that day. Many lives, almost all the houses, boats and
other fishing equipment were lost completely disrupting normal life.

To help them ‘survive’ through this traumatic aftermath, aid agencies were providing
clothes, temporary shelters, rations and everything else for immediate needs much of it
more than was needed. A quick assessment of the complex situation was concluded as,
the best way to kick start was to provide people resources to resume their livelihoods, and
in short question of sustenance was to be answered.

But the question of sustenance was far fetched for most, even at policy level of disaster
management, be it, government agencies or national or international NGOs in picture.
The concept of economic rehabilitation and trusting their ability of self-sustenance lead
me to be part of the initiative of PlaNet Finance India.
The first issue was to convince the donors, be it several organizations and private donors
to think in those lines and utilize their fund for economic rehabilitation thus having
lasting impact on the fishermen communities. Because without their support we would
not have been able to implement as we thought was correct for all the parties involved.

To start with, we took initial assessment of damages and costs of rehabilitation.

Analysing the evaluation and sourcing of funds from donors who trusted us with their
contribution, we were in a position to kick off the project.

We realised that there were practicing microfinance providers but now in wake of this
disaster they turned into donating NGOs. It was because there was a competitive feeling
amongst all those who were there to give and go to give as much as possible without
credible impact and its ultimate usage (a lot of things like stoves, fans were sold in
adjoining areas, thus defeating the purpose). It took lot of convincing on our part to the
fishermen community about the objective and intention of the program. Because there
were claims and promises by many NGOs and welfare trust to provide them with free
boats and fishing accessories, which they found more tempting.

Long meetings and negotiations with the members of community and fishermen with
detail explanations and commitments were done to help them understand that we are here
for long term plan for them which include financial independence and being disaster-
prepared.

Boat lease project was launched with twenty fishermen who stood by us and understood
the implication of our efforts with them. We were supported be CRED (Centre for Rural
Education and Development) who opened the office in the middle of village and shared
the responsibility of including the excluded by starting savings plan and self help groups
of women to involve them in sharing the income generating activities.

Anshul Goel
ICFAI Business School, Gurgaon.
Project coordinator, PlaNet Finance India.
Objectives of the Project

The project had categorically mentioned its objectives before the inception. Objectives
help in decision making and evaluation of actions. So if we wish to successfully achieve
the projected impact, it was critical to have well laid objectives.

1. To start the income generating activities among the fishermen communities.

The critical success factor for the project was the initiation of income generating
activities amongst the villagers of Seruthur. They lost all the means namely boats,
engines, nets and accessories in the wave. Appendix 1 and 2 will show the gap
generated because of damaged and lost boats during the disastrous visit of sea
waves. The equipments form critical source of income generation hence it was
logical for us to provide them with it at earliest and make them start the fishing
activity.

Women form an important source of income generation activity as they are

responsible for the sale of fishes in the market but they had nothing. The biggest
market for fish, ‘Valankini’, was erased and equipment like balance, ice box
container and carrier were all lost. Thus the subsequent activity was also to be
considered.

2. Financial discipline training amongst the fishermen

This community is self sufficient and independent. But they as a community are
cut-off from mainland society. They are financial powerhouse of the Indian
fisheries which form a distinct share of India’s GDP, but still they remain poor.
The basic reason is their lack of financial disciple. This forms the second most
critical factor for impact assessment. The financial disciple will help them free
themselves from money lenders and be prepared for any natural disaster. Thus
 making them aware of the need and ways of being financially independent we can
have lasting impact on their future sustenance.

3. Access to financial services.

Being a community involved in fishing activities, they are considered unskilled

and uneducated which is not true. These communities find difficult to utilise them
into productive actions. By financial services we mean like bank loans and saving
schemes etc. are some financial assistance they must receive. But they are not
included, which increases the burden of poverty on them which is why we wish to
include this issue, as an objective which deserves our focus. Earlier linkages with
bank by SNEHA Microfinance have failed to bear any impact.
Expected Output

The impact assessments of tsunami help us realise the faults in the old system hence it
was intervened by providing services which will help them improve the future. Objective
when laid form the basis of output that is expected by the effort and money put in.
We based our expectation primarily on following basis:

1. Improve the scale of operation of partner organisation CRED (centre for rural
education and development)

PlaNet Finance India, has a policy of increasing the extent and reach of
microfinance in India and Indian sub-continent through partnership development
with co-microfinance practitioners. PlaNet Finance India assists the partner to
increase the scope and scale of operation in their region by providing them
consultancies and IT backup through training and funds.

Keeping that in mind we wish that this initiative will increase their operational
reach through the introducing those to new communities and areas. This will scale
up their operation and help us achieve a critical output of giving value to the
partner and hence enabling her to handle situation of similar nature elsewhere.

2. Do away with dependence of money lenders

The financial set up is similar to what it is in any rural area. Because the villagers
have no access of formal financial services to rural areas as remote as ‘Seruthur’.
The only option left for fishermen in need of funds were money-lenders charging
them high rates of interests. To change the status quo we planned to infuse
financial services in the village by providing them funds free of interest to women
of village but only for employment generation activities like tailoring, fish
vending being prime two. This will impact both women status and increase the
income of the house hold as a whole.
Understanding what was before and after Tsunami scenario

3. Develop financial discipline

My study of income and expenses of fishermen suggests that, they are using a
giant resource called ‘sea’ which helps them to be independent but despite this
fact, they are poor and underprivileged. The reason was their lack of financial
disciple. They don’t realise the value of savings and its importance. It is male
dominated society who is bread earner and spends on their life style not saving for
future. The project should be able to achieve this disciple so as to help this
community in long run. The disciple includes cultivating habit of savings, income
generating activity oriented loans not consumption oriented loans.

4. Sustainable development of means of income generation.

The sustainable development is the prime concern and a critical success factor for
such a project. This is important because of the fact that it is prime objective also
and it prepares them for future contingencies when we are not there. If it is
achieved it would have lasting impression and the village level financial model
will change for own good.

5. Improve accessibility of financial services.

 Financial services accessibility in India in particular is very poor. The local money
lender becomes the bank with collaterals. High interests ensure they don’t rise in
income ladder.

The formal setup may take time but by then we must ensure that no income
generation activity should be hampered in the wake of lack of funds.

Methodology
 1st phase of assessment
(Visit to village) Initial draft
(First boats to sea)
Govt.
agencies 2nd phase of Village
(Dept. of assessment community Committee
fisheries, (Visit to village) members
comm. relief)

Donors
(India and abroad)
CRED
(Partner)
FINAL DRAFT

Donors
(Funds) IMPLEMENTATION Form Self Help Groups (of 5
women each, for Savings and Loans)

Recruiting
staff and
Opening of Information Kiosk
office (Photocopy, cyber café,
in Seruthur & photography, fax etc.)
Nagapattinam

Sourcing of Final
Equipments: Develop &
negotiation
Fiber boats (Village
implement
Engine committee) MIS
Nets and
accessories

The first mission lead to several follow up missions in January until April by several
experts, in an attempt to clarify doubts and understand better the situation but the rapidly
changing situation in a post disaster area made it impossible to initiate the project.
OPEN HOUSE - Understanding the issues involved with fishermen

By the time an approach was decided and understood by a potential donor the situation
on the field changed completely thereby requiring a reassessment and adaptation of the
project activities.

The first mission in January, a project titled “First 10 Boats on the Sea” was drafted and
circulated with the idea that since no project at that time was focusing on livelihood
regeneration it would be easy to introduce a financial discipline associated with the
packages under the project.

A sleepy micro lease was also designed associated with the boats after preliminary
consultations with the fisherman community but by the time the donor was convinced
about the approach it was several months and most aid agencies had shifted focus to
livelihood restoration and were providing boats and other fishing equipment for free.

Even under those circumstances the project team made several visits to the village
spending many days and even nights talking to the fisherman, the community leaders, the
district administration, the fisheries department and others involved to make them see the
benefits of using the situation as an opportunity to introduce a financial discipline
focusing first on savings shifting gradually to credit and other financial services in order
to build strong long term coping capacities among the beneficiaries. The discussions were
also helpful in understanding the organization of the fishing communities and their
relationships with neighboring inland communities and it turned out to be a very complex
web of relationships which at the point was keeping them from taking decisions in their
best interests.

Taking advantage of a newly formed village committee, after the dissolution of the old
one which was against the idea of engaging the fisherman in a financial mechanism,
which was more understanding towards our approach a new round of consultations were
launched with the fisherman to identify those who were genuinely interested in the
advantage of our approach and had not received boats from elsewhere for free. These
consultations several times lasted as long as 4 hours each and sometimes immediately
after the conclusion of the meetings the collective decisions arrived at required to be re
looked at. After these meetings which were held with small groups of fisherman and their
families a final arrangement was arrived at which then was to be approved after being
presented at a weekly community meeting where the entire village was present together
with the their leaders consisting of the village committee.

Simultaneously, an order was placed for five

FRP (fiber reinforced plastic) boats as the
manufacture and delivery would take about
4 weeks. Even this was done in consultation
with the fisherman as they were unhappy
and suspicious of the quality of many of the
boats given by other agencies for free. Other
equipment such as fishing nets, floats
NEW ENGINE FOR NEW START -- Motors for the boats with Booblan near kiosk

(plastic and wooden), ropes and other accessories were also purchased in consultation
with the fisherman and did not pose that much of a problem since the quantity required
was small but here too the quantity of nets to be given with each boat was heavily
debated with the fisherman demanding 100 kg and our information indicating only 50 kg
per boat. Finally the order for the purchase of engines was issued after convincing the
company to deliver them in 20 days (in line with the delivery date for the boats) when
there was a waiting period of 4 months normally. Many of the boats donated by other
agencies were standing on the seashore waiting for engines as the manufacturers were
few and had many orders. The intention was to have complete fishing kits at the same
time and not have to wait to send the fishermen to sea.

The situation was once again becoming precarious as the deadline approached and the
negotiations with the fisherman did not seem to end. The fishermen were determined to
bring us to accept to give them the boats for free without the associated financial
mechanism. Two of the five boats were delivered in the village and a final community
meeting was called to freeze on the final package. This meeting continued for three hours
and we even had to go to the extent of making a mock call to the boat manufacturer to
deliver the remaining boats to another village as we had changed the plan and did not
need boats for Seruthur anymore. In the meanwhile the engine delivery was being put off
by another two weeks as the manufacturer was finding it hard to deliver on the promised
date.
We had planned a small launch ceremony in the evening by the beach so that immediately
after the ceremony the fishermen could go to sea with their new boats and till the
morning we were still, waiting for the last of the five boats to arrive, running after the
engine supplier to make the delivery on time, exchanging some fishing nets found
unsuitable by the fishermen for good ones and negotiating with the fishermen to accept a
financial package associated with the boats.

In addition we had been following up with the local office of ING, local television and
news channels, NGO coordination cell, national and international development
institutions and NGOs to make sure that they are there for the launch.
Finally a compromise was reached at 10.30 PM on June 5 and we were sure that we had
real fisherman for the launch of the boats. Finally the fisherman agreed to repay 100
rupees everyday on each boat and more if they had a good catch.

Kiosk was conceptualized because there

was need for a source through which, we can
monitor on the fishing activities and make
our presence felt consistently through
weather updates and current fish prices
update.

Other essential services like photocopy,

photographing, fax were 15 km distant thus
keep villagers in great need. When we
realized this we thought of selecting a
suitable educated villager whom we can train
KIOSK FOR ALL – kiosk in the village

to operate sophisticated but user friendly machines and would also be a great initiator for
self employment servicing the needs of villagers and achieving sustainability. Post
training we extended a lease program to the youth and now after being successfully
running is able to cater to other village fishermen. Kiosk also runs as office and
monitoring station where fishermen and women visit daily to deposit the specified
amount of money according to the loan taken.

This kiosk can further be developed into an IT training school and information regarding
hygiene and sanitation and newer technique for fishing can be shown to them.

Women SHGs were formed under Ms. Kalaiarsi, a youth very active in community
schemes. 20 SHGs were formed with 5-6 members each and extended financial services
like loans for icebox, balance and metallic container making them equip to sell the fishes
in the market. Thus creating second source of income in the family.

As we see the MIS report coming from the office, we feel that all the initiatives are going
right way. Every thing seems to be falling as planned or projected and this bring great
elation as efforts are bearing fruits. Two months later we are impressed with the
repayment rates on the boats as the fishermen despite only a few days of fishing in a
month due to bad weather are paying more than the minimum they have agreed to and the
loans given to the women’s groups are also being repaid well. At the same time more
families are now interested in joining our project instead of receiving freebies from other
projects as they see sustainability in this and this brings both joy and a big responsibility
on our shoulders.

ALL FOR ONE AND ONE FOR ALL

(From front L – R-- Self, Mr. Shivendra Sharma (PlaNetfinance India), Mr. Alegesan (CRED), Boobalan (fishermen)
Back L – R – other fishermen of the village)
Observation

General observation in context:

MICROFINANCE:

Microfinance is often considered one of the most effective and flexible strategies in the
fight against global poverty. It is sustainable and can be implemented on the massive
scale necessary to respond to the urgent needs of those living on less than $1 a day, the
World’s poorest.

Microfinance consists of making small loans, usually less than $200, to individuals,
usually women, to establish or expand a small, self-sustaining business.

Microfinance includes several support systems that contribute greatly to its success.
Microfinance institutions offer business advice and counseling, while borrowers provide
peer support for each other through solidarity circles.

An equally important part of microfinance is the recycling of funds. As loans are

repaid, usually in six months to a year, they are re-loaned. This continual reinvestment
multiplies the impact of each dollar loaned.

Microfinance has a positive impact far beyond the individual borrower. The vast
majority of the loans go to women because studies have shown that women are more
likely to reinvest their earnings in the business and in their families. As families cross the
poverty line and micro-businesses expand, their communities benefit. Jobs are created,
knowledge is shared, civic participation increases, and women are recognized as valuable
members of their families and communities.

Microfinance could help the poor to move beyond day-to-day survival, plan for the
future, and invest in better nutrition, housing, health and education for their children.
Microfinance built on their ideas, energy, and vision, grew productive enterprises and
allowed communities to prosper.
Underlying Principles

Microfinance practitioners agree upon six general principles that guide the establishment
of microfinance programs. These principles, describing underlying values of the
microfinance program are reflections of learning from the field experiences of
microfinance experts. The principles are:

Serve the poorest clients reflects the larger goal of microfinance to promote social and
economic justice through serving poor communities and providing them opportunities.

Link loans to savings are a means to connect the size of the clients’ loan to the amount
of the clients saving to ensure that they build capital as they borrow.

Use self help group guarantees, wherein a group guaranteed loans replace collateral.
This ensures availability of loan to members of group who cannot otherwise offer any
security against the loan.

Practice participatory management, wherein the self elected group undertakes the task
of management and administration of the financial services that they receive (which
include voting on loan applications & collecting payments from other borrowers).

Invest in scale and self-sufficiency, to ensure building capacity of key players in the
process right from the genesis. Achieving scale this way is reinforced which is critical to
advances the mission of microfinance serving the poor.

Plan for permanence. Prior to launching a new microfinance project, map out the
project's evolution into a sustainable resource for the poor. Such permanence may include
creating a formal financial institution, helping partners transform programs into
specialized microfinance institutions or consolidating pilot activities into larger local
entities etc.
Tsunami’s Impact on Fisheries & Aquaculture in Southern India
The worst-affected regions were the State of Tamil Nadu and the Andaman and Nicobar
Archipelago. The States of Pondicherry, Andhra Pradesh and Kerala were affected to a
lesser extent. 10,714 people have been killed, 5,669 are missing and 647,521 have been
displaced with 376,171 people now living in relief camps.

Source: UNDMT situation report (Jan, 2005)

It is clearly evident that Nagapattinam district suffered highest death toll. Damage to life
and property (boats, nets, houses or vehicles etc.) is also the highest. To make our
program more relevant, we decided to focus on Nagapattinam. This thought of helping
these communities by way of providing them micro-finance as a medium of rehabilitation
and employment regeneration, we focused on worst hit part of Tsunami affected area.
Macroeconomic Impact

Localized Impact. The tsunami has had no impact on India’s GDP or that of the affected
states. The states’ GDP are unaffected because economic activity along the coastline
contributes very little to the states’ income.

Expenditures Impact. The impact on the public finances of the states is limited to the
expenditure side only. The contribution of the affected coastal regions to consumption
taxes like sales tax, excise etc is relatively insignificant. The impact of additional
expenditures, in turn, varies across states depending on the requirement of rehabilitation
and reconstruction activities.

The area of grave concern after Tsunami is the L I V E L IHOOD:

Damage and Losses in Fisheries sector:

According to UNDP, the tsunami destroyed or damaged nearly 5,000 mechanized boats
causing damage valued at Rs. 663.1 crore ($152.4 million); a total of 7,933 fiber-
reinforced plastic boats/vallams valued at Rs. 50.1 crore ($11.5 million); about
24,580 boats of other categories, mainly motorized, valued at Rs. 121.0 crore ($27.8
million); and 35,483 wooden catamarans valued at Rs. 90.0 crore ($20.7 million).

Impact on Other Livelihood means related to fishing

Of them, about one-third (220,784) are directly linked to the fisheries sector, about one-
fourth (143,000) to micro-enterprises, while the remaining 281,216 are engaged in
agriculture, livestock, seasonal employment or intermittent activities. The disaster hit the
livelihoods of those that were already poor with the hardest hit including women,
scheduled castes and scheduled tribes.
 Adverse impact of tsunami has accentuated the damages to micro-enterprises due to the
marked interdependency in coastal economies. The vulnerability of micro-enterprises to
disruptions in sources of supplies and markets has led to loss of income and employment,
especially for women. The damage to agriculture and livestock, though not significant,
has also affected the livelihoods of coastal communities, mostly women.

In short we can conclude that tsunami had impacted the South India economy. Impact can
be sub divided as follows:

“VISIBLE” “LESS VISIBLE” “INVISIBLE”

Marine fishing boat, Inland River fishing net and catamaran owners Traders, shopkeepers,
catamaran and from inland river side villages (especially Irula) kiosk owners, transporters
trawler owners from (taxi, lorry etc), workers
coastal villages People who sell fish (especially female headed who sell food and other
households who do not own a boat or who live in goods to households that
Fishing labourers neighbouring villages and depend on trading have lost purchasing
who live in coastal or activities) power following the
riverside villages tsunami or within tourist
Agricultural land owners and labourers whose areas.
People whose house land was inundated with sea water and debris
was destroyed or Money lenders who have
who lost a member of Salt pan and shrimp farm owners and their capital tied up in owed
their family labourers credits which they will not
see repaid for a long time.
People otherwise linked to the fishing trade
including ice and fish factory owners and their
labourers, fishing basket makers, fish traders, boat
carpenters etc.
DISASTER

Tsunami brought the focus on impact of Disaster on the poor and the deprived especially
to a country of economic status that of Sri Lanka. Tsunami brought to light the fact that
despite presence of microfinance in this arena serving the beneficiaries and preparing
them well enough to face any such calamity.
Natural disasters, Disaster Mitigation and Disaster Management

Natural Disaster is “a natural event, sudden or progressive, with such severity

that the affected community or country has to respond by taking exceptional measures”.

Disaster Mitigation is “measures aimed at reducing the impact of a natural or manmade

disaster on the nation or community; and the application of these measures to moderate or
reduce the effects and impacts of current, or future disasters”.

Disaster Management is “an applied science that seeks by systematic observation and
analysis of disasters, to improve measures relating to prevention, mitigation, preparedness,
emergency response and recovery”.(Silver, 2001)

Natural disasters will become fully recognized as a major risk factor in international
development. Until Dec. 26, 2004, most development analyses or projections of the
social and economic needs of Indonesia are unlikely to have included contingency
planning for a major earthquake or tsunami. Indonesia will likely spend the next several
decades battling the social and economic consequences of this tragedy. It is important
however to note that natural disasters have been costly. According to a recent report by
the United Nations Development Program (UNDP), annual economic losses from natural
disasters worldwide averaged $75.5 billion in the 1960’s. The average annual economic
cost was $138.4 billion in the 1970’s and $213.9 billion in the 1980’s. The cost in the
1990’s was $659.9 billion.

A vicious cycle of poverty and oppression is directly or indirectly responsible for the
majority of the deaths from the tsunami, and deaths from preventable causes. They lead
to needless suffering of poor people, especially when natural disasters occur, in contrast
to their counterparts in wealthier countries. Sadly, the ‘solution’ proposed by some
politicians in rich and poor countries -– more foreign aid –- is unlikely to actually
improve the situation. Only through the institutions of a free society can poor people
move from the vicious circle of poverty and oppression, to a virtuous circle of
empowerment and development.

Disaster profile of India

The Indian sub continent has been exposed to disasters from time immemorial. The
increase in the vulnerability in recent years has been serious threat to the overall
development of the country. Subsequently, the development process itself has been a
contributing factor to this susceptibility. Coupled with lack of information and
communication channels, this had been a serious impediment in the path of progress.
India’s vulnerability to various disasters has led to mounting losses year after year.
Mammoth funds were drawn to provide post disaster relief to the recurring victims of
floods, cyclones, droughts and the less suspecting landslides and earthquakes.

Considering the vast area of the Indian landmass, around 57% of the land vulnerable is to
Earthquakes, 28% is vulnerable to Droughts, 12% is vulnerable to Floods and 8% of the
land is vulnerable to Cyclones. Adding to this is the susceptibility of various man made
hazards. Figuratively speaking, around one million houses are damaged annually,
compounded by human, economic, social and other losses.

Understanding the impact on world wide work

In addition to having a higher exposure to disaster risk, the poor and near poor are more
vulnerable than the non-poor due to their limited access to effective risk management
strategies and instruments. Individuals, households and communities are particularly
constrained in managing disaster risk. While informal or market-based risk management
instruments are usually effective in dealing with idiosyncratic risks, they tend to
breakdown in the face of highly covariant, macro-type risks such as disasters. Moreover,
many disaster risk management issues are beyond the capacity of the individual
household, requiring community and/or broader social interventions.

Disaster risk management seems like a good candidate for public intervention given that
damage from disasters tend to be large, locally covariate and unfortunately efficient in
targeting the poor, while being nationally idiosyncratic and often difficult to insure.

Credit, savings and insurance services have a great potential to increase the risk-bearing
capacity of poor households. Given their fungibility, substitutability and
complementarity, it is important that these three dimensions of financial services be
considered simultaneously (Siegel, 2000a). In the case of disaster risk, microfinance may
help the poor cope with disaster, and in a more limited manner, reduce their direct risk
exposure. Credit can help reduce risk through income smoothing while savings can help
mitigate and cope with risk through consumption smoothing. After a disaster, poor
households seem to prefer using as sources of credit friends and relatives first. Demand
for credit may be influenced by the timeliness and flexibility of the financial services and
the size of loans offered by MFIs. Despite its potential contribution to risk management,
microfinance alone will not help clients make it through a disaster. There is a need for
public interventions such as work programs and other safety net mechanisms, as well as
grant and subsidies. Being a microfinance client, at the same time, may put additional
pressures on a poor household, especially if a disaster strikes and the institution and the
client have not been proactive enough to mitigate disaster risk, or have at minimum
prepared for it.

The portion of social and economic resources – including those provided by microfinance
– that a poor household will invest in disaster risk management will depend on how much
disaster risk such household unwittingly and to a larger degree unknowingly, tolerates.
Disaster risk reduction, it must be emphasized, is not high in the priority list of most of
the poor. Even in developed countries, most households and even the public sector do not
generally adopt cost-effective mitigation measures to reduce future disaster losses. Many
of these households have chosen disaster-prone locations. In developing countries, in
contrast, avoiding or reducing disaster risk exposure is not always a choice available to
many of the poor. Under conditions of high disaster risk exposure, the direct costs of
mitigating and coping can become unbearable to them. Without prevention and
mitigation, many more lives will be lost, and homes and productive assets will be
destroyed or damaged periodically. Eventually, coping mechanisms will become
ineffective, recovery too costly and thus unaffordable by the poor, who will become even
poorer.
Need for disaster preparedness by MFIs

The Disaster Risk Index (DRI),which is presented as the centrepiece of addressing the
issue of Disaster management. The DRI provides the first global assessment of disaster
risk factors through a country - by – country comparison of human vulnerability and
exposure to three critical natural hazards : earthquake, tropical cyclones and flooding,
Volcanic eruption and the identification of development factors that contribute to risk.
Reliance on internationally available data and the use of human deaths as a proxy for
disaster losses meant that certain types of disasters were excluded from the model.

What is the DRI ?

The DRI enables the calculation of the average risk of death per country in large- and
medium-scale disasters associated with earthquakes, tropical cyclones and floods, based
on data from 1980 to 2000. It also enables the identification of a number of socio-
economic and environmental variables that are correlated with risk to death and which
may point to causal processes of disaster risk. In the DRI, countries are indexed for each
hazard type according to their degree of physical exposure, their degree of relative
vulnerability and their degree of risk.

The conceptual model

Underlying the DRI is the concept that disaster risk is not caused by hazardous events per
se, but rather is historically constructed through human activities and processes. As such
the risk of death in a disaster is only partially dependent on the presence of physical
phenomenon such as earthquakes, tropical cyclones and floods. In the DRI, risk refers
exclusively to the risk of loss of life and excludes other facets of risk, such as risk to
livelihood and to the economy.

When clients lose property and production assets – thus eroding their capacity to repay
and absorb debt – an MFI’s portfolio quality and liquidity position are put at risk. When a
natural disaster strikes, both the client and MFI become vulnerable.
Should MFIs respond to non-financial needs in times of disasters?

“The greatest benefit for MFI clients is the survival of the MFI itself,” says the report. It
recommends that the “primary focus must be on ensuring sustainable delivery of financial
services,” while the provision of non-financial services is secondary to this goal. Potential
non-financial interventions to consider include:

1. Providing training on risk awareness (For example, how to avoid diseases during a
disaster such as malaria, cholera or tuberculosis; how to diversify your asset base).

2. Disseminating information (For example, providing information on what emergency

services are available and how to access them).

3. Distributing food and non-food items (For example, distributing basic foodstuffs
such as grains, beans and fats; and non-food items such as household supplies, medicines,
vitamins etc. in conjunction with health programs).

In 1998, when BRAC helped clients deal with post-flood damage in Bangladesh, it
needed to source additional funds from donors for relief activities. At the same time,
MFIs like ASA and SafeSave decided to focus on providing financial services to their
clients.

Each of these approaches has its pros and cons. Some points for an MFI to consider in
opting to simultaneously offer financial and non-financial services include:

• MFIs will need funding to cover the additional costs of these services. An MFI’s
regular activities will likely become more costly and income will decrease, at least
temporarily, so it is vital to ensure that it has sufficient funds for financial services
as well as non-financial ones.

• Loan portfolio quality must be under control before an MFI

• Undertakes new activities.

• An MFI’s liquidity position must be adequate for projected future needs.

 • Accounting systems must be able to track expenses for thes e activities separately.
Additional personnel for accounting might be necessary.

• An MFI may be limited by its human resource capacity. A disaster will stretch
capacity, and staff will be implementing procedures that they have onl y practiced
before. How such activities will be designed, implemented, managed and evaluated
should be well planned.

• Clients who do not receive sufficient explanation as to why, how, and for how long
the MFI will be involved in these services could start to see the institution as a
relief agency, and fail to make future payments.

An MFIs’ success in delivering non-financial emergency assistance depends mainly on its

ability to manage, implement, and source additional funds for these activities. It is
important to consider that whatever good reasons MFIs may have in assisting in disaster
relief efforts, they should be ready to assume an additional burden on their infrastructure,
financial resources, management information systems, and staff without getting their
regular activities harmed.
Should all MFIs have plans to respond to natural disasters?

Institutions in different parts of the world face different exposure to risk: some MFIs
operate in disaster-prone areas, while others do not. Not all institutions, therefore, need to
invest heavily in detailed disaster management tools and staff training focused on disaster
preparedness. When an MFI is able to identify the level of risk that it - and its clients -
faces, it becomes easier for it to gauge the necessary investments in institutional capacity
and human resources development.

New product development

The development and roll-out of new products in a short timeframe, the guidebook
suggests, may be “ill advised.” Alternatively, MFIs that come up wit h a wide range of
products long before the disaster - including savings, home improvement loans, leasing,
insurance, and money transfer services – are better placed to reduce clients’ vulnerability
in a disaster situation.

Access to savings, for example, will help people who experience a cash crunch but at the
same time hesitate to fall back on accessing new debt in an uncertain environment.
Money transfers – a vital source of income in many developing countries– become even
more vital when people do not have alternative income sources in times of disaster.

Housing loans not only help the poor repair and rebuild their homes but also provide
essential resources to ensure that their homes will be more disaster-resistant. Recovery
loans – those an MFI offers immediately after the disaster – should be reserved for an
MFI’s current clients because, as the guidebook suggests, new clients bear an increased
risk if they do not have previous experience in managing loans. Mitigation products –
those that an MFI offers to clients to reduce their vulnerability and minimize the impact
of the next natural disaster -- are accessible to both new and current clients.
1. Carrying out a rapid portfolio review.
2. Imposing a moratorium on lending.
3. Restructuring loans.
4. Writing-off loans.

Overview of response measures

There are a number of portfolio management procedures and modifications to current

policies and products that an MFI may consider if a disaster strikes. The most
common ones include:
5. Switching from group-based liability to individual liability during the disaster.
6. Providing emergency loans.
7. Allowing withdrawal of forced savings.
8. Modifying loan product terms.
9. Providing non-financial emergency services.

Involvement in Other Activities of PlaNet Finance India.

 • Represented PlaNet Finance India in Microfinanace conference held at
Ashoka Hotel, Delhi. The benefit I feel of attending it was, I realised the
expanse of microfinance in differently looking streams of operations be it
consumer banking technology policy or networking. This also introduced
me to some of the highly placed people in this industry.

• Participated in process mapping training conducted by PlaNet Finance

India. It helped me understand the need for processes at micro level and its
intricate details of operations which will help me in future. Important
decision makings like new product launch process was discussed in details
among big MFIs of India namely SKS, SEWA, BISWA etc.

• Participated in MPEA Awards, which was to commemorate the best

process practised by MFIs. 94 MFIs participated and it was learning
experience for me to be part of the management teams.

• Participated in ICT application conference organised by Department of

Information Technology, Government of India. It helped me realise the
role technology can play and options we have for implementation.

• Member of launch team of “SMALL CHANGE” World’s first and only

magazine on international scenario of microfinance and micro
entrepreneurship.

• Member of production team for movie titled “100 days after Tsunami”,
dedicated to making world how we plan to provide sustainable
rehabilitation assistance to fishermen community.

Conclusion and Recommendations

Being actively involved in this disaster management after Tsunami struck the shores of
this peaceful village of Seruthur, I realised the fact that there was a requirement of study
with regard to implementing microfinance in these communities. I have following
recommendations to this regard:

1. Microfinance as tool for sustainable development

Implementing the project we have achieved the basic motive of planting a seed of
microfinance in a soil levelled by nature. Survival and then moving on to
sustenance will be a critical for rehabilitation of disaster struck people. I realise
the fact that microfinance can assist poor and help them move up the economic
ladder.

2. Rehabilitation policies are to be defined before hand and followed religiously

Indian government and local authority should be prepared for the fact that this
sub-continent is prone to disasters and here frequency is very high. Thus policies
have to be drafted and implemented like a text book thus making their acts
predictable and rational. Sharing the burden can also be undertaken but ultimate
responsibility rests on government agencies. During Tsunami the fact remained
that the issue of rehabilitation was a question while government agencies were not
focussed.

3. Practising microfinance providers should be away from donating

I observed that the fact that most of microfinance institutions were quick to move
but they lost the focus by giving things for free and thus losing the focus. The
beneficiaries confused and expected every one to do the same which happened.
According to UN report, we must not follow the trend, as the market for
microfinance loses ground.
 4. National and International donors should rational

Donor responsibility does not end by just parting with the funds out of emotional
outpour. Sensible donors find credible use of the money. Rationalising the
concepts will help donors maximise the impact of funds donated.

5. Poor communities should be disaster prepared

Financial disciple must be induced by way of training and implementing

microfinance in these communities. Whenever disaster strikes the poor is the one
who gets poorer. To stop this phenomenon we have to financially empower them
by way of saving to assist them in recovery.

Reference:
ACDI Concept Note (Jan, 2005). “Tsunami Disaster Recovery”

Asian Development Bank, United Nations and World Bank. (March, 2005). “Post
Tsunami Recovery Program Preliminary Damage and Needs Assessment”

Bhat, B. Vishnu. (04 January 2005). “Impacts of the Tsunami on Fisheries, Aquaculture
and Coastal Livelihoods”. Reports of NACA/FAO/SEAFDEC/BOBP-IGO. JD
(Aqua) MPEDA.
(http://www.newkerala.com/newsdaily/news/features.php?action=fullnews&id=517
44)

CGAP Report. (Feb, 2005). “Sustaining Microfinance in Post-Tsunami Asia”.

Clay, Dr. Edward. (Jan 2005):“The Indian Ocean Tsunami: what are the economic
consequences?”. Research done by Overseas Development Institute. (Source:
http://www.odi.org.uk/speeches/disasters_2004/natural_disasters_report.html)

Enrique Pantoja. (July 2002). “Microfinance and Disaster Risk Management Experiences
and Lessons Learned”. Source: Provention Consortium, World Bank.

FAO Report. (2005). “Impacts of the Tsunami on Fisheries and Aquaculture Livelihoods
- Regional Overview”.

FAO Report. (March 2005). “Post tsunami Asian agricultural banks formulate strategies
for reconstruction of affected fisheries and aquaculture”.
(Source: http://www.fao.org/tsunami/stories/spotlight2203.htm)

ILO. (Jan, 2005). “Strategy For The Reconstruction, Rehabilitation And Recovery Of The
Earthquake And Tsunami-Affected Countries In Asia”
Mathison, Stuart. (Sept 2003). “Microfinance and Disaster Management”. Source: The
Foundation for Development Cooperation
Meher, M Shyama. (2005). “Tsunami-footprint on Kerala economy”. Report in Kerela)
Calling. http://web.mid-day.com/news/nation/2005/january/100672.htm)

Mehu, Sowmya Aji. Times News Network [Jan 01, 2005]. “Poor Fishermen Get Back To
Sea” (source:Http://Timesofindia.Indiatimes.Com/Articleshow/977629.Cms)

Miamidian, Eilee. Arnold, Margaret. Burritt, Kiendel. Jacquand, Marc.(Feb 2005).

“Surviving Disasters and Supporting Recovery: A Guidebook for Microfinance
Institutions”. Source : UNCDF and World Bank.

Microfinance Gateway (1998). “Disaster Preparedness and Response: MFIs, Are You
Ready?”.
(Source: http://www.microfinancegateway.org/content/article/detail/25019)

Montaldi, Alessandro (Dec, 2004). “TDH Project to Develop Sea farming Opportunities
for fishers and coastal families”. The project was provided technical assistance by
NACA and DOF.

Nagarajan, Geetha (March 1998). “Microfinance in the Wake of Natural Disasters:

Challenges and Opportunities”. Source: Development Alternatives, Inc.

Naveratne, Harsha Kumara. SEWALANKA Foundation. (Jan, 2005). “Tsunami Disaster

Strategic Response Paper”

Nicholls, Robert.(2005). “Impacts on coastal communities”. Middlesex University,

London.

Oxfam International. (feb 2005). “The tsunami disaster is far from over in India”, Oxfam
Briefing Note.

Prahalad, C.K. (2004). Book titled ‘Wealth at the Bottom Of Pyramid’.

Report (March, 2005), sponsored by Government of Tamil Nadu and Department of
Fisheries: “Towards Post Tsunami Livelihood Security for Fishing Communities in
Tamil Nadu”.

Report by Asian Development Bank. ‘Tsunami Impact Summary: India”

(Source:
http://www.adb.org/media/articles/2005/6684_India_tsunami_disaster/default.asp?
RegistrationID=guest')

Report. (Feb, 2005): “Employment Scheme Suggested For Fishermen”. The Hindu.

Report. (Report on impact of tsunami on fishermen of Kerela). (Source :

http://www.ndtv.com/template/template.asp?template=Tsunami&slug=Kerala+fish
ermen+devastated+by+tsunami&id=66183&callid=1&category=National)

Report. CGIAR. ‘CGIAR Centers plan Post-Tsunami Action’

Report. Report on tsunami “After the Deluge”. The Economist.

Report: (Kerela):
(1) Tsunami relief operations in Kerala. Very detailed information with contact
numbers for local authorities. (Source: http://www.kerala.nic.in/tsunami.htm)

Report: (Tamil Nadu):

(1) Disaster Management and Mitigation Department – list of contacts. (Source:
http://www.tn.gov.in/tsunami/contact.htm)
(2) Nagapattinam District Coastal Areas TSUNAMI Affected Village Particulars
and map. (Source: http://nagapattinam.nic.in/tsunami/tsuna_affv.htm)
(3) Report by Government of Tamil Nadu website, (Jan 2005).
(Source : http://www.worldagroforestry.org/sea/W -New/aceh.asp)
Roberts, John.(2005,Jan). “The Indian Ocean Tsunami: How can the region recover
economically?”, Opinion, Overseas Development Institute.
(Source: www.odi.org.uk/publications/opinions)

Singh, Dr. Naresh. (Sept, 2002). Paper titled ‘Perspectives on Emergence and Growth of
Micro-finance Sector in India’.

Sukumaran, Shradha. (Jan,2005). “Relief work needs direction”. Mid Day.

UNDMT Situation report India 14 January 2005.

UNDP Report. “Reducing Disaster Risk: A Challenge For Development, A Global

Report”

World Bank. (Dec 2004). Report titled ‘India Scaling-up Access to Finance for India’s
Rural Poor’.

World Health Organization Situation Report No. 19, 16 January 2005.

World Bank Report. (2001). “Lending Instruments Resources for Development Impact”

General web sites for references:

www.adb.org
www.cgap.org
www.nabard.org
www.planetfinance.org.in
www.sidbi.org
www.siffs.org
www.tn.gov.in/tsunami

Other key information resources

Maps of affected areas
(Source: http://www.mapsofindia.com/maps/tsunami-in-india/tsunami-affected-area-
india.htm)

Annexure

1. Information gathered of target village “SERUTHUR” is as following:

PRE TSUANAMI STATUS

No. of boats Persons involved (per boats) Engine(HP)
FRP boats 198 3 to 4 7 to 9 (LOMBARDI make)
 Big Boats 28 7to 9 high capacity Ashok Leyland

Catamarans 98 One manual

Source: Self study
2.
POST TSUNAMI STATUS
Partially Damaged Completely Damaged Lost Running
FRP boats 75 25 98

Big Boats nil 3 13 1

Catamarans 98
Source: Self study
3. Seasonal variations with regard to the type of boat a person works
Activity April May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Catamara Good Normal Poor Normal
n owner
FRP Normal Good Poor Normal
owner
Mech. 45d holiday Good ‘Difficult’ Normal
Owner
Fish sales High price Normal Good
Agric Rice: sowing, transplant, weeding Rice harvest
Plant, weed, harvest G-nuts
Salt Production No production Intensive Production
Boat Good Normal Poor Normal
repair
Ice sales Normal Poor Good

4. Study income and expenses model for fishermen

Two types of fishing is done:
Types Duration of fishing Diesel used Ice Food Cost Cost of Catch
1 6 hrs. 7 to 10 ltrs nil nil 200 to 1000
2 2 nights 30 ltrs. Rs.165 Rs. 300 1000 to 4000
Source: self study
5.
(estimate cost of boats drawn by discussion with villagers) ( amount in Rs. Lakhs)
Cost of Boat Cost of Nets Total Time taken for manufacturing
FRP boats 1.2 1 2.2 5 days for all boats

Big Boats 10 to 15 1.5 to 2 11.5 to 17 6 months per boats

Catamarans not considered as upgradation to FRP boats is priority
Source: self study