Module 5: Livelihood Restoration Microfinance and Disaster Management
Module 5: Livelihood Restoration
Microfinance and Disaster Management
SLIDE 2 of 27– MODULE 5: LIVELIHOOD RESTORATION
Objectives
To understand:
• what livelihood activities are• how to assess local needs and design appropriate livelihood
promotion activities• appropriate client selection• ‘for’ and ‘against’ arguments of livelihood promotion programs
for microfinance providers• issues related to monitoring and evaluation of livelihood
promotion programs
SLIDE 3 of 27– MODULE 5: LIVELIHOOD RESTORATION
Topics
1. Introduction2. Should a MFI implement livelihood promotion activities after a
disaster? 3. Context assessment4. Client selection5. Program selection and design6. Monitoring and evaluation7. Summary
SLIDE 4 of 27– MODULE 5: LIVELIHOOD RESTORATION
1. Introduction
Key concepts:
• Livelihood
• Sustainable livelihood
• Livelihood promotion activities – short- and long-term
SLIDE 5 of 27– MODULE 5: LIVELIHOOD RESTORATION
Livelihood Definitions
A livelihood comprises:
• capabilities,• assets (including material and social resources), and• activities
required for a means of living.
A livelihood is sustainable when it can cope with and recover from stresses and shocks, and maintain or enhance its assets and capabilities whilst not undermining the natural resource base.
U. of Sussex, used by DFID and World bank
SLIDE 6 of 27– MODULE 5: LIVELIHOOD RESTORATION
Livelihood Promotion Activities
Livelihood promotion activities aim to help beneficiaries become economically self-reliant over the long term.
Brainstorm: what examples of livelihood promotion can you think of?
Does your organisation engage in livelihood promotion?
Is ‘microfinance’ a livelihood promotion activity?
SLIDE 7 of 27– MODULE 5: LIVELIHOOD RESTORATION
Livelihood Promotion Activities - Examples
• Credit, savings
• Cash-for-work
• Cash grants
Financial Non-financial
• Skills training• Employment
services• Marketing services• Business
development services
• In-kind grants
Class exercise: Sort these examples into ‘short-term’and ‘long-term’ activities
SLIDE 8 of 27– MODULE 5: LIVELIHOOD RESTORATION
Short- and Long-term LivelihoodPromotion Activities
• Cash-for-work
• Cash grants• In-kind
grants
Short-term Long-term
• Skills training• Employment
services• Marketing services• Business
development services
• Credit, savings
SLIDE 9 of 27– MODULE 5: LIVELIHOOD RESTORATION
2.Should an MFI Implement LivelihoodPromotion Activities after a Disaster?
The question refers to activities beyond traditional ‘core’ microfinance.
1. Long-term activitiesDo you normally offer ‘microfinance-plus’? If ‘no’:
• Is there demand for the ‘plus’ services? (see Topic 3 - Assessment)
• Do other organisations provide these services already?• Does your organisation have the skill / knowledge / capacity to
deliver?
2. Short-term activities• There are challenging design issues relating to cash-for-work,
cash grants and in-kind grants (see Topic 5 – Program selection and design)
• There are a few success stories, but many more failures!
SLIDE 10 of 27– MODULE 5: LIVELIHOOD RESTORATION
‘For’ and ‘Against’ Implementing Livelihood Promotion Activities after a Disaster
Brainstorm: what are some FOR and AGAINST arguments for a MFI implementing ‘non-core’ livelihood promotion activities after a disaster? Consider both ‘short-term’ and ‘long-term’ activities, as discussed.
SLIDE 11 of 27– MODULE 5: LIVELIHOOD RESTORATION
3. Context Assessment
• A comprehensive assessment of the context is needed BEFORE designing livelihood promotion activities.
• The assessment team should have expertise in economic development.
• The MFI needs to understand its own strengths and weaknesses, which determine what it can and cannot do.
• When undertaking assessments, it is important to take into consideration:
clients suppliers environment
SLIDE 12 of 27– MODULE 5: LIVELIHOOD RESTORATION
Example: A ‘Microfinance’ Assessment
Who Issues
Clients Economically active poorExperienced business people
Household income/expensesTypes of businessesCapacity to repay
Suppliers MoneylendersOther MFIsBanksCooperatives, self-help groups
Who are their clients?What regions do they cover?What are their products?
Environment
GovernmentCentral bankStatistical offices
Regulations on savings mobilisation?
Minimum reserve requirements?Registration requirements?
SLIDE 13 of 27– MODULE 5: LIVELIHOOD RESTORATION
Context Assessment Exercise
Group activity:
1. Divide into groups
2. Each group select a different livelihood promotion activity (skills training, in-kind grants, cash grants, employment services, etc.)
3. Each group discuss how it would conduct an assessment for the livelihood promotion activity. Fill in the table on the handout.
SLIDE 14 of 27– MODULE 5: LIVELIHOOD RESTORATION
Example: A ‘Skills Training’ Assessment
Who Issues
Clients Unemployed, working age, physically capable population
What skills exist in the community?What fields and skills have potential for additional employment?
Suppliers Training institutesUniversitiesPrivate businesses, individuals
Trade associations
What training is offered?Cost for participation?Prerequisites for participation?Credentials of instructors?
Environment
Laws and regulationsStandards
Is government licensing necessary?Who monitors / regulates standards?
SLIDE 15 of 27– MODULE 5: LIVELIHOOD RESTORATION
Example: An ‘In-kind grants’ Assessment
Who Issues
Clients Individuals who are capable of making the most of goods distributed
Skills needed to work with product?Capacity of clients to purchase product ---(e.g. to borrow and repay)?
Suppliers Local producersLocal importers
Price and quality of locally produced items
Demand for and supply of locally produced items
Environment
e.g. For livestock grants - regulatory agency (Ministry of Agriculture)
e.g. Health codes such as vaccinations, quarantines
SLIDE 16 of 27– MODULE 5: LIVELIHOOD RESTORATION
4. Client Selection
The client selection profile for livelihood promotion activities is essentially the same as for microfinance client selection.
Role play
Client A
Client B
Downtown
60kmClient C
SLIDE 17 of 27– MODULE 5: LIVELIHOOD RESTORATION
Microfinance Client ‘Inclusion’ Profile
Experience has shown that the best microfinance clients are the entrepreneurial poor who, for example:
• run small businesses that operate in active markets
• borrow from informal sources for enterprise purposes
• operate in large populations and high population density
• live in a reasonably stable social environment
SLIDE 18 of 27– MODULE 5: LIVELIHOOD RESTORATION
Microfinance Client ‘Exclusion’ Profile
• Microfinance is not a ‘safety net’ program, so it is normal to have some people excluded after determining their profile.
• Some poor people are not included because, e.g.: they are not entrepreneurial poor, that is, they do not
operate microenterprises they live in remote areas with small population and
population density there is minimal cash economy they live in an unstable social environment.
• The non-poor are not usually targeted, as they have access to mainstream financial services (e.g. provided by formal banks).
SLIDE 19 of 27– MODULE 5: LIVELIHOOD RESTORATION
Livelihood Client ‘Inclusion’ Profile
• The client selection profile for many livelihood promotion activities is essentially the same as for microfinance client selection.
• The primary target for enterprise-oriented livelihood promotion activities is the entrepreneurial poor.
Exceptions include ‘skills training’ and ‘employment services’ that are well targeted to people who are not entrepreneurial.
• Since microfinance and many other livelihood promotion activities target the same client profile, these services go hand-in-hand and can be mutually supporting.
SLIDE 20 of 27– MODULE 5: LIVELIHOOD RESTORATION
5. Program Selection and Design
Read the case study scenarios on the handout, and make some notes regarding good vs bad practices.
Brainstorm: Consider each of the livelihood promotion activities listed on the following slide, and discuss whether you think the intervention will have a positive, negative or no impact on your microfinance activities, and why.
SLIDE 21 of 27– MODULE 5: LIVELIHOOD RESTORATION
Impact of Livelihood Interventionon MF Program (1)
Intervention Impact on MF Program
Cash-for-work
Cash grants
In-kind grants
Skills training
Marketing services
Business consulting services
Employment services
SLIDE 22 of 27– MODULE 5: LIVELIHOOD RESTORATION
Intervention Impact on MF Program
Cash-for-work Often negative … depends on design
Cash grants Often negative … depends on design
In-kind grants Often negative … depends on design
Skills training Positive … may delay sustainability
Marketing services Positive … may delay sustainability
Business consulting services
Positive … may delay sustainability
Employment services Neutral … not the same clients
Impact of Livelihood Interventionon MF Program (2)
SLIDE 23 of 27– MODULE 5: LIVELIHOOD RESTORATION
Grants and Loans in Livelihood Restoration• The client selection profile for many livelihood promotion
activities is essentially the same as for microfinance client selection.
• Despite concerns from the microfinance community, grants are often provided to microentrepreneurs following a natural disaster.
• The challenge for relief agencies and microfinance providers is to design these interventions so that:
they contribute positively to restoration of livelihoods, without creating dependency, and without undermining efforts to provide market-based financial services on a sustainable basis over the long term.
SLIDE 24 of 27– MODULE 5: LIVELIHOOD RESTORATION
• Grants are not suitable for all disaster situations.• Do not mix loans and grants in a single contract. Wherever
possible, provide grants through a relief partner and loans through an MFI.
• Be transparent with the criteria for selection of grant beneficiaries.
• Provide grants for only a very short time.• Grants should be one-off, and there should be a ‘graduation’
process to market-based mechanisms such as micro-credit.• Require beneficiary participation for asset replacements.
See FDC Brief 3, ‘Grants and loans for livelihood restoration following a natural disaster’
Guidelines for Grants and Loans
SLIDE 25 of 27– MODULE 5: LIVELIHOOD RESTORATION
• Different livelihood promotion activities have different timeframes.
• Some are long-term; some are short-term and temporary.
• Short-term activities can usually be implemented more quickly.
• However, experience has shown that organisations that plan their overall strategy, both short-term and long-term together, can develop a more coherent response to a disaster and have greater positive impact.
When to Commence Livelihood Promotion Activities
SLIDE 26 of 27– MODULE 5: LIVELIHOOD RESTORATION
6. Monitoring and Evaluation
• ‘Client satisfaction = impact’ is a common presumption among livelihood practitioners.
• However, for free or subsidised activities, client satisfaction is not enough.
• At the design phase, you need to include monitoring indicators that are specific, measurable, achievable, relevant and timely.
Brainstorm: what indicators has your organisation used to measure the efficiency, sustainability and impact of your MF operations?
What are some indicators that might be used to measure the impact of other livelihood promotion activities?
SLIDE 27 of 27– MODULE 5: LIVELIHOOD RESTORATION
7. Summary
• A livelihood promotion activity aims to promote economic self-reliance.
• There are both financial/non-financial, & short-/long-term interventions.
• Mixing grants with loans is dangerous. With the large number of relief organisations, clients become confused and the result is often a negative impact on repayment discipline.
• It is important in disaster contexts for organisations doing microfinance to differentiate themselves from other relief activities.
• Organisations should design their livelihood programs in unison to ensure programs complement each other.
• Do not forget to monitor and measure impact and progress – the number of participants is not enough!