Microfinance in the Face of Adversity: Emergency Loans in Cameroon
During annual field visits to our microfinance partners, we often see them searching for better ways to help their clients. Unexpected household shocks can seriously jeopardize the livelihoods of the poorest entrepreneurs and their families. The microfinance sector may be in its infancy in successfully providing access to financial products to buffer the effects of devastating health emergencies, floods, droughts, fires and other disasters, but we have seen innovative approaches from partners all over the world designed to mitigate these unexpected events.
The real impact of unexpected emergencies is often that households are forced to liquidate their personal and productive assets or stop working altogether for longer than expected. In these cases, funds may not be available to, for example, access health treatment after an illness or rebuild a home or business after a flood or fire.
In April the Asset and Market Access Lab at the University of California Davis and BRAC microfinance with funding from USAID released this short summary of their research into a variety of products and strategies designed explicitly to help poor entrepreneurs overcome emergencies. One strategy they present is to offer pre-approved emergency loans that would be triggered when major external shocks such as flooding hit communities where BRAC’s clients are located.
This month I had the opportunity to visit Whole Planet Foundation’s microfinance partner GHAPE in northwest Cameroon. GHAPE offers basic group business loans and micro-savings services to men and women in rural Cameroon from their headquarters in Bamenda. Their services are actually quite similar to the microloans offered by BRAC but were developed locally in this part of Central Africa. I was quite surprised to find out that built into GHAPE’s founding operational strategy was the idea of emergency loans. Each loan group has access to a small, no-interest loan fund to offer to members when they need to cover unexpected personal emergencies over the course of managing their GHAPE business loans. These emergency loan funds have proven very successful for both GHAPE and their microcredit clients.