Recovery Prog. Aftermath Nat. Disasters

closed

The objective of the recovery program is to establish a mechanism to guarantee the availability of contingency resources that are easily accessible for use in emergencies to: (i) contribute to the recovery of microenterprises in areas affected by emergencies; and (ii) support private microfinance institutions, both regulated and unregulated, in the development of mitigation mechanisms to bolster their clients and their financial and operational self-sustainability in the face of this type of crisis. The recovery program consists of a credit facility for microenterprise channeled through both regulated and unregulated private IFIs. For purposes of the program, the term disaster is considered to refer to any emergency due to the action of natural, accidental, or human-generated actions that cause death, damage to the physical and service infrastructure of any borrowing member country, or a loss of material goods so extensive that economic and social development is affected. Given that the portfolios of microfinance institutions in most countries are not representatives of the local capital markets, this support for the coverage of assets/liquidity of the institutions would not affect the regular operation of the capital markets. In general, it is estimated that in countries with significant microfinance portfolios, the latter account for less than 2% of the market's total formal banking. Conversely, social balance objectives would be achieved by supporting with a means of production the sustained growth of the region's microentrepreneurs. The program will have two components: a reimbursable one comprised of resources to grant credits to the microentrepreneurs affected by natural disasters, and a nonreimbursable one, in order to provide technical support for the IFIs and resources for program administration.