Bangladeshi Experience in Adapting Financial Services to Cope with Floods: Implications for the Microfinance Industry
Every year, a growing number of microfinance institutions (MFIs) and their clients experience losses and unexpected income declines because of natural disasters such as floods, earthquakes, or typhoons. Bangladeshi MFIs in particular have faced a series of natural disasters. In 1998, the country had its worst flood in a century. Through these experiences, MFIs such as the Association for Social Advancement (ASA), the Bangladeshi Rural Advancement Committee (BRAC), BURO Tangail, SafeSave, and Grameen Bank have seen how such emergencies can affect existing financial products. They also have experimented with different products to help both their clients and their own organizations cope with the impact of a disaster.
To learn more about these MFI experiences and experiments, two researchers from the USAID-funded Microenterprise Best Practices (MBP) Project traveled to Bangladesh in March 2000. This paper summarizes what they learned from a range of MFIs and focuses on three topics: (1) MFI products and product adaptations (including savings, credit, and insurance products), (2) the resulting issues and implications for both clients and MFIs in Bangladesh, and (3) how MFIs in other countries might use the Bangladeshi experience to help inform their own efforts to create and adapt products to protect themselves and their clients against disasters.
The lessons and experiences presented in this report focus on five areas: (1) contextual issues, (2) savings products, (3) credit products, (4) insurance products, and (5) product delivery.