1. Saving and improving lives in the world’s toughest places. The Role of Rural Banks in Disaster Preparedness Lesson Learned from Indonesia Liquidity Facility After Disaster (ILFAD) Program Presented by: M Alfi Syahrin ILFAD Program Manager Mercy Corps Indonesia msyahrin@id.mercycorps.org A presentation for: Third UN World Conference on Disaster Risk Reduction (WCDRR) Sendai, 13-15 March 2015

2. Saving and improving lives in the world’s toughest places. INTRODUCTION TO WEST SUMATRA The Role of Rural Banks in Disaster Preparedness Padang Earthquake in 2009, West Sumatera Scale: Mw 7.6 Casualties: 1,100 fatalities; 3,000 injuries Damage: 100,000 structures Estimated losses: IDR 21.6 trillion (USD 2.3 billion) Data source: Indonesian National Disaster Management Agency (BNPB)

3. Saving and improving lives in the world’s toughest places. BACKGROUND: WEST SUMATERA CASE »As per Bank Indonesia’s rules and regulations, the role of APEX Banks in Indonesia does not permit them to disburse liquidity facility for purposes other than mismatch. »Thus, revising the regulation to “merge” ILFAD liquidity facility scheme into the APEX roles is fundamental. »Alternatively, creating an association that is able to facilitate disaster liquidity fund service is approached. The Role of Rural Banks in Disaster Preparedness

4. Saving and improving lives in the world’s toughest places. THE ESTABLISHMENT PROCESS The Role of Rural Banks in Disaster Preparedness Meetings with PERBARINDO (Rural Banks Association), MFIs and Bank Nagari as an APEX institution in West Sumatera. Bank Nagari suggested ILFAD and PERBARINDO to discuss the matter with OJK (Financial Service Authority) to help revise the *regulation. Idea to form a sovereign institution as an alternative solution for the realization of disaster liquidity account among MFIs. 20 rural banks involved in ILFAD program signed a commitment to be part of ABSIGAB and contribute on all expenses to be incurred by forming the association.

5. Saving and improving lives in the world’s toughest places. ILFAD-ABSIGAB MODEL The Role of Rural Banks in Disaster Preparedness Mercy Corps Indonesia APEX Bank MOU Membership fee Savings Account Escrow Rural Bank Rural Bank Rural Bank ABSIGAB Capacity Building Liquidity Facility Deposit Placement Others funding NGO, Gov’t, etc. Deposit Placement Campaign, Technical support

6. Saving and improving lives in the world’s toughest places. DISASTER LIQUIDITY FUND »Membership fee: o IDR 500,000 ~ $50 (membership premium) o IDR 250,000 ~ $25/month within 1 year (contribution) »Interest rate and payment term: o Deposit placement (within 12 months) of 1% of their third- party funds in return for 10% draw down capability in the event of disaster. »Standard Operation Procedure o DRR related actions in MFIs The Role of Rural Banks in Disaster Preparedness

7. Saving and improving lives in the world’s toughest places. M Alfi Syahrin ILFAD Program Manager Mercy Corps Indonesia msyahrin@id.mercycorps.org For further information: Thank You!