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.Introduction 2.Should a MFI implement livelihood promotion activities after a disaster? 3.Context assessment 4.Client selection 5.Program selection and design 6.Monitoring and evaluation 7.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 FinancialNon-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 Livelihood Promotion 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 Livelihood Promotion Activities after a Disaster? The question refers to activities beyond traditional ‘core’ microfinance. 1.Long-term activities Do 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 WhoIssues Clients  Economically active poor  Experienced business people  Household income/expenses  Types of businesses  Capacity to repay Suppliers  Moneylenders  Other MFIs  Banks  Cooperatives, self-help groups  Who are their clients?  What regions do they cover?  What are their products? Environment  Government  Central bank  Statistical 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 WhoIssues Clients  Unemployed, working age, physically capable population  What skills exist in the community?  What fields and skills have potential for additional employment? Suppliers  Training institutes  Universities  Private businesses, individuals  Trade associations  What training is offered?  Cost for participation?  Prerequisites for participation?  Credentials of instructors? Environment  Laws and regulations  Standards  Is government licensing necessary?  Who monitors / regulates standards?

SLIDE 15 of 27– MODULE 5: LIVELIHOOD RESTORATION Example: An ‘In-kind grants’ Assessment WhoIssues 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 producers  Local 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 60km Client 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 Intervention on MF Program (1) InterventionImpact 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 InterventionImpact 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 Intervention on 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!