Microcredit and disasters

Syed Hashemi believes that when you've lost everything you need a grant rather than a loan:

[Microcredit] lenders, who may themselves be badly hit by a disaster, are best advised to limit their involvement in relief work. Similarly, governments and donors should avoid muddling aid and credit by offering cheap loans. If people have lost everything, they probably need to be given money, not lent it. “To disguise this through a subsidised loan undermines the whole operation.” After grants, a phase of cash-for-work (on reconstruction, say) is often needed before microcredit comes into play.

But The Economist also points out that while microfinance institutions might not be able to offer key post-catastrophe services (such as insurance or access to savings and remittances), they can help fund income-generating assets such as tools and fish nets. The recent results of post-disaster microfinance have been mixed, but hopefully we will learn from the challenges of the past year.

Update: Alana Conner Snibble tells us that the performance of NGOs has been equally disappointing. Poor coordination again appears to be at least partly to blame.