The Nepal microfinance sector’s earthquake response

“2015 Nepal depremi” by Hilmi Hacaloğlu.
Licensed under Public Domain via Wikimedia Commons.

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>>Authored by Sabina Rogers, Communications and Relationships Manager

In a country with poverty that is already among the highest in the world, the devastating earthquake in Nepal this April caused more destruction and destitution than could have been imagined. The Nepal earthquake, estimated to have been a magnitude of 7.8 to 8.1, caused more than 8,800 deaths and 23,000 injuries. You can read all about the subsequent aftershocks that, in any other situation, would be major events in and of themselves. There is also a great deal of coverage of the toll this has taken on Nepali families and the international response. (Watch this video from The Guardian.)

Major destruction identified using satellite imagery by the crowd-source platform Tomnod. Last updated April 29th, 2015. Source: AidData at the Center for Development Policy

Major destruction identified using satellite imagery by the crowd-source platform Tomnod. Last updated April 29th, 2015.
Source: AidData at the Center for Development Policy (

Recent data shows that it will cost over $6.6 billion and at least five years to rebuild the country, according to Nepali government officials. More than one million people may be stranded in extreme hardship for quite a long time. Local microfinance institutions have been working hard to triage their clients’ needs and thinking longer-term about the best response to this disaster.

RMDC logo-no text

RMDC made a Campaign Commitment in 2014

We have been in communication with Jyoti Chandra Ojha, CEO of the Rural Microfinance Development Centre Ltd. (RMDC), which is a wholesale lending organization in Nepal. Ojha has provided us with the information below concerning the Nepal microfinance sector’s response to the disaster.

The earthquake seriously affected 14 districts in Nepal, and microfinance clients are among the hardest hit. From preliminary information collected by RMDC and its members, here are the statistics of those affected:

  1. No. of MFIs affected: 29 (only 4 are highly affected)
  2. No. of branches of the 29 MFIs: 142
  3. Members/clients affected: 129,000
  4. Member deaths: 126
  5. Homes of members destroyed: 163
  6. Branches of MFIs damaged: 7
  7. Houses of Staff damaged: 90
  8. Staff deaths: 1
  9. Portfolio affected: Rs 2.44 billion
  10. RMDC Portfolio affected with MFIs: Rs. 1.29 billion

These details provide a snapshot of the disaster caused to Nepal’s microfinance sector by the April earthquake. On the basis of preliminary analysis, RMDC and their members are in the process of finalizing the following action plan:

Settlement of the survivors affected from the disaster

  • Providing soft loans to rebuild homes: temporary for short-term needs and then planned homes for the long-term
  • Managing the livelihoods of the affected families
  • Managing daily necessities
  • Health and education

Creating conducive economic environment

  • Devising to revive the old economic and farm activities
  • Identifying appropriate local based microenterprises
  • Skill development trainings

Financial Resource management

  • Rescheduling/ writing off of the affected farm and microenterprise loans
  • Providing new loans at lower interest rates
  • Additional Rs. 2 billion will be required to finance in the affected districts

Technical Support

  • Disaster management training
  • Workshop on rehabilitation of affected MFI branches
  • Developing new microenterprises
  • Skill development trainings

RMDC welcomes your support and assistance in carrying out this action for the disaster affected families of Nepal. Contact RMDC today:

Rural Microfinance Development Centre Ltd.
Putalisadak, Kathmandu, Nepal
P.O.Box: 20789
Tel. No.: 977-01-4268019/4268020
Fax: 977-01-4247702

“Collapsed buildings in earthquake-hit Chautara, Nepal” by DFID – UK Department for International Development
Licensed under CC BY 2.0 via Wikimedia Commons.

How you can donate to the ongoing response effort

You can send individual donations to GlobalGiving’s Nepal Earthquake Relief Fund. Additionally, Save the Children has a dedicated Nepal Earthquake Relief Fund. A list of organizations accepting donations for relief efforts is available from William & Mary’s Reves Center for International Studies.

Related reading

E-Workshop Recap: Helping Clients to Prepare for their Old Age

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On June 9th, the Microcredit Summit Campaign co-hosted with the Center for Financial Inclusion (CFI) an E-Workshop focusing on financial inclusion for the elderly. This is part of their 2014 Campaign Commitment to bring greater attention to the issue of aging and financial services and to further support the inclusion of those with disabilities. HelpAge International and Micro Pension Foundation helped make it a great discussion about opportunities for organizations (specifically microfinance institutions) to help clients prepare for their old age. The conversation looked both at the supply and demand sides of financial inclusion to better understand what is happening in clients’ lives and how best to approach these issues.

Watch the session recording:

Review the panelists’ slides:

Recap of the E-Workshop

Sonja Kelly from CFI introduced the focus of the session:

“Financial services needs change throughout the lifecycle, and if a client of microfinance services reaches their old age without having developed a plan to meeting their expense needs, it will be too late. Almost all participants in our webinar reported that they knew someone who had inadequately prepared for their older age. This common issue is one that microfinance can help to address by developing longer term savings products and pensions either in-house or through partnerships.”

Eppu Mikkonen-Jeanneret, head of policy at HelpAge International, began the discussion introducing the shift in populations and subsequently labor markets, noting that there are currently about 800 million people who are over 60 around the world. In 15 years, there will be over 1.3 billion people over the age of 60, of which 60 percent will live in low- and middle-income countries.

The common perception is that the 60 percent in low- and middle-income countries either will not save for their old age or lack the capacity to do so. However, the Global Findex report, which looks at the demand side data of financial inclusion, shows otherwise. According to the report, almost 25 percent of all adults say they have saved for old age in the past year — though it is predominately happening in high-income OECD countries and in East Asia and the Pacific. “Around 40 percent of adults in these two regions reported saving for old age, a far greater share than the roughly 10 percent who reported doing so in all other regions” (The Global Findex Database 2014, page 47).

Eppu explained that 18 percent of the pyramid base reported having saved for old age and 60 percent of the top. Sonja Kelly (CFI) noted that the question now is whether they are doing so in safe and secure mechanisms.

Eppu  expanded on this issue following the session, saying,

“The world is in the middle of demographic sea change; the global population is growing older. This is a result of hugely successful development. We are healthier and better educated, we have less children and we live longer. As a result, in just 15 years the population of 60 years and over will increase from 800m to 1.3b. Far from being a developed country trend, aging is actually fastest in the low and middle income countries. Where it took the European countries over 100 years to transit to an aging population, countries like Bangladesh will do this in just a few decades. In fact, 60 percent of the 1.3 billion people will live in the developing countries.

“We know that people in developing countries continue to work into old age even though the type of work may change. Many work in the informal sector and women especially carry on providing unpaid labour at home. Yet our thinking is locked in outdated associations with people in the 60s onwards as somehow inherently, homogeneously vulnerable. It’s time we embrace the change and take action. Financial inclusion of people across the life course, facilitating social pensions, linking pensions with other financial instruments, and working closely with older women and men will help us all to adjust to the new world.”

Parul Khanna, associate director of projects for Micro Pension Foundation, continued the conversation. She noted this:

“Globally, rapid advancements in technology, telecommunications, and banking outreach have had a powerful impact on the ability of governments to deliver targeted fiscal transfers to the poor, including pension benefits to the elderly. Simultaneously, technology and telecom are reshaping financial services access and delivery, especially among low income excluded households. Most developing countries have a large young workforce, a predominantly informal labour market with modest incomes and savings capacities, a huge pension coverage gap, low banking and formal finance penetration, and limited capacity for large scale fiscal transfers.”

Parul presented their Gift-a-Pension project, which provides micropensions to low-income domestic workers, and she called on participants and readers to take action:

“Can we do something for informal workers around us…[those] who touch our lives every day? Our maids, drivers, security guards or our washerwomen? Or the guy who we buy our bread from every day? Or our barbers? That seems feasible, right?

“For example, it is possible for you to imagine going home today, and spending just a few minutes with your maid or driver to tell them about the importance of saving for old age. And then spending just 10 minutes on the internet to open their own pension account for them? If your answer is yes, then you have within you the power to gift 20 years of a dignified old age to your maid or driver. And if all did this, we could collectively, as a civil society, change the lives of 40 million domestic help forever. Which, incidentally, is more than the total population of Canada.

It took India 6 years to get 3 million low-income people to start a pension account. If each of us go home today and gift a pension to just 1 excluded person in our lives, we could reach from 3 million to 43 million by this weekend!  After all, just 10 minutes of your time can change 20 years of someone else’s life. You can be the change! Try now with Gift-a-Pension.

Thank you to all panelists for contributing to this important conversation about the importance of saving for old age and how organizations can simplify the process for their clients. We also wish to thank all participants who submitted thought-provoking questions and comments to help make the session interactive!

Related resources:

Film on the micro pension model

About Gift-A-Pension

CFI launched a Campaign Commitment in 2014! We invite you also to…

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Microfinance is a powerful tool that the poor can utilize to inch their way out of poverty by taking advantage of new opportunities and better managing the sufferings they face. The social intermediation embedded in microfinance in the form of group functions can build social capital among the poor which, combined with financial capital has the potential to be powerful mix in the fight against poverty. The formation of social capital through the microfinance process can also be used as an entry point to challenge other structures that perpetuate poverty. It is this holistic vision of the possibilities for poverty alleviation that defines BRAC’s vision of microfinance.

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The overall objectives of BRAC Pakistan’s microfinance program are to significantly contribute to the reduction of poverty, create self-employment opportunities, enhance household income level and reduce the vulnerabilities of the rural poor of Pakistan, especially women.

BRAC started its operation in Pakistan by initiating a small scale microfinance (MF) program in the Khyber Pakhtunkhwa (KPK) province in August 2007. Currently, BRAC Pakistan has 97 branch offices across the country. In the next five years, BRAC plans to set up a total of 240 branch offices across Pakistan to run its pro-poor microfinance program.

Key Features of the Microfinance Program

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  • Loan Security Deposit: 10% of the sanctioned amount (refundable after repayment).
  • Service Charge: 20% (Flat) annually.
  • Repayment Mechanism: Payable weekly in 46 equal installments.
  • Repayment period: 1 year for traditional business and 6 months for seasonal business.
  • No collateral is required.
  • After four group-meetings the loan disbursement starts taking place.

Program Impact

  • Promoting gender equity by enabling women to become breadwinners, alongside their male counterparts.
  • Increased participation of women in income generation thus reducing poverty and enhancing social progress.
  • Fostering the development of human potential by empowering women by helping them achieve their potential through vocational training and acquisition of technical knowledge. This has resulted in numerous income generation activities, such as sewing clothes and making handicrafts.
  • Improving people’s living standards. Many of the members of the microfinance program are now leading a prosperous life and their children are receiving educations. The majority of members have expanded their program and recruited more females, contributing to the income of other families.

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Debunking Myths about the Poor and Financial Services

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