By Susan Davis and Scott MacMillan
Looking at one organization's journey from post-disaster recovery to commercial entrepreneurship development in Sri Lanka
The 10-year anniversary of the December 26, 2004 Indian Ocean tsunami will find the world in a sobering situation. Conflicts in Iraq, Syria and elsewhere continue without apparent end, while the World Health Organization calls the Ebola outbreak in three West African countries "the most severe acute public health emergency seen in modern times."
It's worth remembering that countries have recovered from such disasters, both natural and man-made. They have even found within them opportunities for rebirth and prosperity, using strategies like microfinance to make the journey from grant-based aid to commercially sustainable enterprises. Sri Lanka, which has seen both war and natural disaster within recent memory, offers one such example, where the enabling of women's entrepreneurship led from a situation of humanitarian relief to one of self-sustaining enterprises.
Ten years ago, a devastating Indian Ocean earthquake and tsunami hit 14 countries, killing 230,000 people or more, with 35,000 deaths in Sri Lanka alone. It was one the deadliest natural disasters in recorded history. BRAC, an organization that rose from the ashes of Bangladesh's Liberation War of 1971 (the initials once stood for Bangladesh Rural Advancement Committee, but today it is known simply as BRAC) felt compelled to offer assistance to its South Asian neighbour in the immediate aftermath.
BRAC's first humanitarian response Sri Lanka, funded entirely by grants, was geared toward immediate relief and rehabilitation. Despite being from a country that was actually poorer than Sri Lanka in terms of income, the team from Bangladesh knew about recovering from floods and other disasters. Working primarily with Sri Lankan women and their families, they provided emergency food and medical care. They headed up the restoration of contaminated water wells, so people could drink clean water. They constructed latrines to prevent health hazards and replaced lost and damaged school materials. They even operated in the east of the country in the midst of a protracted civil war.
BRAC began to organize Sri Lankan women whose livelihoods had been swept away by the tsunami into groups, beginning with clusters of roughly 10 women. Its intention was to deliver group-based, collateral-free microloans to encourage entrepreneurship, a practice pioneered in Bangladesh by groups like BRAC and Grameen Bank.
BRAC took a phased approach. First it provided in-kind grants to women in need of assistance, typically productive assets such as sewing machines or spinning looms to tsunami-affected. Then it began providing zero-interest loans to selected clients, followed by reduced interest loans at 7 percent or lower, much below commercial rates at the time.
Within a year of operations, BRAC was reaching over 26,000 microcredit clients, making it a significant microfinance player in Sri Lanka. One local microfinance expert interviewed for a recent report credited BRAC's "well established management practices, systems, and a ready methodology largely replicated from Bangladesh."
Gradually, interest rates were increased to commercial rates by 2007. The clusters of women entrepreneurs, known as village organizations, grew to as large as 45 members each. By 2009, BRAC's microfinance operations had passed the break-even point, and in 2012, operational self-sufficiency was 124 percent. This was achieved in part thanks to support from BRAC USA, Whole Planet Foundation, and other philanthropic investors.
Just shy of the 10-year anniversary of the tsunami, BRAC's presence in Sri Lanka came to an end in September 2014 when, after entering into a joint venture with a local company to co-manage its microfinance portfolio, BRAC sold its stake for USD 4.7 million, thus completing the journey from aid to enterprise to exit. BRAC leaves behind a sustainable, regulated financial institution serving the needs of local entrepreneurs. A case study on BRAC's experience in Sri Lanka by Sadna Samaranayake will be released later this year.
"Sri Lanka is successful because we started with grant funding," said S.N. Kairy, the chief financial officer of BRAC and BRAC International, prior to the sale. "This is the best way to set up, as it allows you to really reach the poor, and then allows a path for sustainability to emerge. If there is no grant, then in effect, you are serving a higher income portion of the population, perhaps the moderate poor. But to eventually get to a place of sustainability while serving the poorest, an organization needs some level of subsidy at the start."
This is not just a story about Sri Lanka. In the early 1970s, Bangladesh had been devastated by war and natural disaster, including a 1970 cyclone that killed an estimated 500,000. Since then, gains in basic indicators of health and wellbeing, including maternal and child mortality and literacy, have been among the steepest ever seen, largely because of the empowerment of poor women. Microfinance in Bangladesh now generates income both for poor women and organizations like BRAC, which uses the surplus from other related enterprises to help fund activities such as healthcare and education.
Despite the situation we find ourselves in today with the rapidly unfolding crisis in West Africa due to the spread of the Ebola virus, it's worth looking at trends from recent decades to understand how philanthropic capital can build models of sustainability. Crises of historic magnitude can lead to equally historic gains if women have the tools they need to seize control of their lives and wellbeing. Since 2008, BRAC operates two microfinance companies in Liberia and Sierra Leone which were approaching financial sustainability and which served over 50,000 members, a majority of whom are women. As we focus attention on emergency care and humane treatment of survivors, we must keep an eye on the ways that we can ensure people have a chance to thrive and long term sustainability of key institutions. There are important lessons for us all in seeing the humanitarian-development continuum, not the divide.