> Posted by Jeffrey Riecke, Senior Associate, CFI
Typhoon Haiyan, one of the strongest tropical cyclones ever recorded, struck Southeast Asia in early November 2013, creating unspeakable devastation. In the Philippines alone, where the typhoon’s wrath was concentrated, over six thousand people lost their lives. One microfinance institution, ASA Philippines, sprang into action only a day after the typhoon hit, demonstrating not just microfinance’s social mission, but also how providers in the industry are evolving to support their clients through more than just credit.
Typhoon Haiyan affected 16 provinces where ASA Philippines had operations, spanning 72 branches and 104,708 active borrowers amounting to a loan portfolio of roughly 365 million Philippine Pesos (~US$7.5 million). Fast forward to the present, about two years later, ASA Philippines has almost a 99 percent collections rate and the institution is thriving. How did the institution manage this crisis? Hint: It wasn’t because of merciless collections practices.
The day after Haiyan hit, ASA Philippines’ president traveled to Tacloban, a city that was largely destroyed by the typhoon, to visit the local ASA Philippines office. For the staff, the president’s presence underlined the ambitious and important relief work ahead of them. Under normal operating circumstances, ASA Philippines’ offices are open 24/7, reflecting the institution’s motto of BWYC: Be with Your Clients. ASA Philippines works towards a culture of immediate response, during the typical day-to-day operations, and during times of tragedy. I recently spoke with a few ASA Philippines staff members and they drew a link between support for clients and client trust. Clients will remember the first person that helps them, I was told. This connection fosters trust and connection, which in turn supports efforts to repay loans.
Step one for ASA Philippines in Tacloban was visiting clients. The city was awash; government offices were closed. Staff visited members’ homes and spoke with them about their conditions and family needs. In cases where a family member had died, ASA Philippines exercised trust. As long as family members vouched for the death, the necessary insurance benefit was provided, without a need for the standard documentation usually required for claims.
ASA Philippines’ door-to-door client visits were not a last-minute mandate – they were part of the institution’s pre-existing preparedness policy for typhoons and other calamities. According to the policy, borrowers were granted a rehabilitation advance loan if desired, half as a grant that clients didn’t have to pay back and half as an interest-free loan with a horizon of one year. Secondly, ASA Philippines gave borrowers affected by Haiyan a moratorium of two months – which could later be extended depending on the situation on the ground. In deciding who was to receive these moratoriums, the institution had clear approval guidelines involving multiple organizational levels. And ASA Philippines’ policy mandated that relief to clients be administered within 24 hours of acknowledging the incident.
In total, out of the 104,708 affected ASA Philippines borrowers, only 838 write-offs have been necessary, a total of about 2.31 million Philippine Pesos (~US$50,000). However, it was decided that, given the circumstances, if these borrowers later wanted to rejoin the institution, they would be able to do so. The same applied to members who had to move to different areas of the country and had their repayments/contact with the institution disrupted: as long as it was due to Haiyan, they were also permitted to come back to ASA Philippines.
In addition to financial measures, ASA Philippines members were given solar lamps, mosquito nets, and fishing boots. Medical missions were carried out in collaboration with other MFIs and local institutions in the country.
ASA Philippines was able to take-on these extensive relief operations in part due to a special fund the institution created for such calamities, amounting to 417 million Philippine Pesos (US$8.7 million). The fund covered all the losses due to Haiyan. In the end, the expenses attributed to Haiyan totaled 110 million pesos. Since about 35 million pesos of that was issued as interest-free loans, it eventually returned to ASA Philippines, resulting in a net expense to the institution of about 75 million pesos.
The relief efforts of ASA Philippines and other MFIs were streamlined thanks to the Microfinance Information Data Sharing System (MIDAS) in the Philippines. MIDAS, a private credit bureau, was created by ASA Philippines and six of the largest MFIs in the country to maintain comprehensive histories of clients. Unfortunately, typhoons and cyclones are relatively regular occurrences in the Philippines, so when tragedy strikes, MFIs can extract the names of affected members from the MIDAS system to ensure that they aren’t duplicating efforts.
As extreme weather increases, it’s increasingly imperative that more MFIs and relief providers in the Philippines and elsewhere follow the lead of proactive institutions like ASA Philippines.
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