Microfinancing is absolutely necessary for micro and small entrepreneurs to build their businesses in the event of any crisis situation, said Executive Director of the Foundation for Development Cooperation (FDC) Beris Gwynne.
He was addressing an international conference to discuss strategies to build awareness on the importance of micro financing and emergency relief.
Microfinance will help to mitigate or reduce the damage caused as a result of any natural or man made disaster, Gwynne said.
The conference was held last week with the participation of government, private sector and international representatives at the HNB Tower.
The theme of the conference was "The Pan Asia Forum on Capacity Building for Microfinance in Crisis Situations".
Gwynne said microfinance is an essential tool to help rebuild lives and living conditions of affected entrepreneurs.
He said that it could also help to prevent or mitigate the effect of a crisis situation by restoring their business entities to its former position.
In a situation such as the tsunami disaster microfinancing projects could help entrepreneurs to re-start their businesses with hope and dignity, he said.
The Program Manager of FDC Stuart Mathison said that microfinancing needs policy and new products to reduce the vulnerability of their clients.
Microfinance should be smart to reduce the impact on rebuilding and recovery process in a natural disaster or conflict situation.
One of the objectives of this forum was to identify capacity building needs and to design a regional capacity building program, he said.
Senior Deputy Governor of the Central Bank of Sri Lanka W.A. Wijewardena said that a crisis may occur due to various reasons.
He said that some feel that micro entrepreneurs will not survive after a crisis which is a misconception. It is the need of the hour to find solutions in rebuilding micro entrepreneurs.
After a crisis situation these projects could enhance the lives and businesses of affected people, he said. Sri Lanka had been hit by the tsunami and most of the micro enterprises were affected along the coastal line. Therefore emergency relief and microfinance projects helped those affected tremendously, he said.
Wijewardena said that the loan recovery rate on microfinance projects were 90 per cent which is a healthy situation.
Most microfinance entrepreneurs are very particular to pay their loan instalments on time and this is the reason, he said.
Other normal recoveries have dropped from 70 per cent to 30 per cent during the last decade, the Senior Deputy Governor said.