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The Role of Microfinance in Livelihood Restoration Following a Natural Disaster

Restoring livelihoods of people affected by natural disasters
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This brief discusses the role of microfinance in livelihood restoration following a natural disaster.

MFIs are invariably drawn into livelihood restoration following a natural disaster. They work closely with relief agencies for a smooth and quick transition from relief to reconstruction. Some relief agencies have provided a combination of grants and loans, often in partnership with MFIs and local self-help groups.

Finally, microfinance is an important component of the livelihoods approach which helps the poor to improve their livelihoods by strengthening natural, social, human, physical and financial capital. This approach includes:

  • Giving people salaried jobs and other opportunities to earn income;
  • Providing loans, savings and other financial services;
  • Providing training in job and business skills;
  • Developing institutions, alliances and networks to advance economic interests;
  • Promoting policy and social changes that improve people’s livelihood prospects.