Country: India
Organization: All India Disaster Mitigation Institute
2) Sector of activity: Financial Services
3) Description of your products or services: The Livelihood Relief Fund (LRF) restores local markets and encourages economic development after a disaster has struck a particular area. LRF offers a full business service package to reinstate and improve livelihood conditions for local entrepreneurs who have lost the capital required to run their businesses. LRF introduces a business recovery model, which represents a transition towards livelihood- oriented focus in relief and rehabilitation.
To create supply and demand, which vanishes after a large natural disaster, the 'cash for work' plan is started. This project initiates supply of work and purchasing power for community members to create demand of products and services.
After this first recovery of the market, local entrepreneurs are provided LRF to restore their businesses by giving them the resources to produce. This does not only give individuals the possibility to maximize economic productivity, but prevents the rise of inflation, and increases local demand/supply for products and services. Furthermore, entrepreneurs are able to invest–benefiting suppliers. Thus, the local markets receive multiple positive inputs and are invigorated quickly.
When the restoration of the local market has been completed, the cycle of business development and reduction of vulnerability does not stop. Clients are offered a secondary injection on a demand basis, wide coverage/low priced insurance and membership of the Chamber of Commerce and Industry for Small Businesses (CCISB).
Not only does LRF empower people and aim for long term recovery, it is also an innovative demand-based concept. Services are tailor made for every client, taking advantage of the entrepreneurs’ local knowledge and incentives to apply for the best materials.
4) Description of the operational model: LRF receives applications either from entrepreneurs, organisations at the village level who have worked with AIDMI, volunteers working in the area, or applications collected during field visits by LRF teams. The application will detail the potential clients’ pre-disaster livelihood, damage caused to their livelihood, and the requirements to restart the livelihood. The respective field team then starts an assessment of the businessman's situation, recovery opportunities, trustworthiness, and the financial feasibility of the request. Through experience and local knowledge, the field teams have developed strategic methods for efficiently discerning the validity of applications.
After the application has been submitted, LRF determines, together with the costumer, where the materials should be purchased. Since they are entrepreneurs, they often know which suppliers offer quality products for a reasonable price. The clients make the final decision. Nevertheless, LRF does play a role in the process of purchasing the means of production, because, as a mass purchaser, LRF can exploit the benefits of economies of scale.
With regard to the insurance schemes, LRF has the role of mediator. LRF acts as a representative of its clients to find an insurance scheme demanded by the entrepreneurs.
The final aim of the programme is to make communities completely sustainable and independent. Therefore, LRF has initiated the CCISB which enables the entrepreneurs to improve their situation, fight future obstacles themselves, and create solidarity. The initiative has a significant impact on communities in terms of human and social capital, which is crucial for a further independent growth of local businesses.
5) Description of the financial model: The provision of relief to businesses affected by disaster is unconditional and does not require repayment. The secondary injection is provided in the form of an interest free loan; thus clients can make full use of the received capital.
Once the clients have gained purchasing power, the projects become financially sustainable. LRF's risk transfer initiative provides insurance to LRF clients which are required to pay a premium. LRF negotiates the premium on behalf of the participants, thus affording them a less rigid payment plan, increasing the affordability of the scheme. To become a member of CCISB a small fee to cover the costs of LRF is requested. For the clients, the initiative is self-sustaining as they become financially independent. Moreover, due to the large loyalty towards LRF, many clients have decided to return money to LRF once they gained enough income, covering more than 45 Lakhs of the costs. Once income starts to flow, the need for relief diminishes, clients are able to improve their businesses, and local markets flourish. Thus, the services of LRF start as a welfare model, subsequently turning into a business model after the phase of initial recovery. Consequently, LRF sees the initiative as extremely worthwhile, while only the initial phase is not entirely self-sustainable. Nevertheless, to cover the costs of the relief phase; LRF does need social investments from organisation like ABN- AMRO, Munich Re, Swiss Re and the EU.
Client fees represent this approximate percentage of operational budget: 20%
6) Key operational partnership: In order to receive honest and accurate information about the background, needs, and socio-economic development of the clients during the different stages of the programme, LRF works together with a wide variety of social organisations, including local volunteer associations, and NGO's. These long-term partnerships increase the efficiency of the process of assistance and monitoring. Furthermore, different partners provide information from a wide variety of perspectives, which can improve the clarity of the situation.
The insurance scheme provided by LRF is a partnership with different insurance companies, for whom the project is part of their Corporate Social Responsibility (CSR). Experience has shown that the project is profitable for them.
Furthermore, LRF works together with various banks, which acknowledge that entrepreneurs, who initially lack capital, become profitable clients in a later stage. After businesses have recovered and start making profits, some owners open bank accounts and deposit money, while others ask for loans to invest.
LRF is determined to strengthen existing partnerships and initiate new ones to create a network in which its knowledge can be shared and efficiency increased. For example, recently, student practitioners of the Indian Institute of Management (IIM), Ahmedabad, have prepared business plans for LRF to further improve its services.
7) Current outreach:
We are at the Scaling Up stage. The LRF cycle has been started in different areas after 4 major disasters; the 1998 Kandla Cyclone in Gujarat, the 2001 Gujarat Earthquake, the 2002 Gujarat Riots and the 2005 Tsunami in South Asia. As a market based-recovery model LRF is fully established. However, as an ongoing programme, it is expanding in many ways at the same time.
LRF has gained a lot of experience and knowledge about its clients, partners, and the market during the last seven years. This offers them the perfect opportunity to assist our clients even more in their road towards a more prosperous future. Together with clients and partners, existing aspects of the programme are undergoing a continuous process of improvement and new initiatives are constantly being launched. For example, recently, LFR has started to offer clients (and their children) training courses on different topics like Emergency Medical Response (EMR), HIV, and alternative livelihood. Furthermore, clients can apply for health kits.
How many clients have benefited from your product/service in total? Over the last year? LRF serves more than 13,500 clients in 8 districts of Gujarat and 2 Tsunami affected states in South India, in both urban and rural communities. The clients of LRF are all vulnerable poor people affected by natural and manmade disasters with a particular focus on working women, marginalized castes and tribes. Once entrepreneurs have successfully applied for LRF's services and have proved that they have improved their situation due to LRF's services, we do not leave. The road towards a more prosperous future is long and LRF is more than capable to adjust the services it offers to the current demands of its clients.
What percentage of your clients is below the poverty line ($2 per day)? 99% All our clients are below the poverty line, as it is one of
the major criteria to be approved for assistance, and they
are the worst affected in a disaster situation. LRF aims to
reduce vulnerability to future disasters by providing
victims with the means to gain an income through their
businesses. Since poverty and vulnerability are strongly
correlated, there is a danger that individuals in disaster-
prone areas would become perpetually trapped in a state of
disaster, and their chances of recovery and subsequent
sustainable development would be very much diminished.
What is the order of magnitude of the potential demand for your products or services? Which
other low-income groups, countries or regions could benefit from it? Try to quantify (number
of clients, market size in currency):
The simplicity of its operational model, and the huge socio- economic impact it has on those who need it the most, makes this an initiative worth implementing in Gujarat, India, and outside. For example, for a disaster-prone, less- developed and poor area such as those found in the South of India, LRF will make a significant contribution. Additionally, AIDMI is already active in these areas providing Tsunami relief to thousands of victims, making the process of implementation easier. Potentially, there are tens of thousands of low income business outside of Gujarat, who could benefit from LRF.
In the short term, LRF could serve 1500 clients in the Tsunami affected area where AIDMI has already initiated other projects. In the state of Gujarat, 2000 floods affected clients of AIDMI could immediately benefit from LRF's activities.
8) Scale-up strategy:
How many low-income individuals do you plan to benefit in three years from now? How are you planning to scale up or replicate your solution? What are the major constraints to scale up?
LRF is to scale-up its services in 3 directions; services in areas where AIDMI is already involved in other projects; new services for existing clients of LRF; and services for vulnerable low income entrepreneurs in areas where AIDMI is not active yet.
AIDMI provides services for low-income people all over India. This wide base of clients offers LRF the chance to implement its programme in these areas smoothly and effectively. For example, in the near future, LRF will expand its programme to Tamil Nadu where AIDMI is already involved. It will serve more than 1500 entrepreneurs.
New services for existing clients, which are ready for implementation include; Social Micro-credit, a shelter security fund and a mutual fund. All services that will contribute towards socio-economic development and risk reduction.
India is one of the most disaster prone countries in the world, because of which the need for LRF will continue. When disaster strikes again, LRF will respond immediately and will offer it services to every sincere entrepreneurs in need.
Which specific areas - and why - in your field would benefit most from investment by corporations, foundations, and other investors:
Disasters, like the December 2004 Tsunami, have a devastating effect on vulnerable people like the poor. If we want to reduce poverty on global scale, as agreed upon in the United Nations' Millennium Goals, reducing vulnerability to future disasters is essential. Since poverty and vulnerability are strongly correlated, there is a danger that low-income individuals in disaster-prone areas would become perpetually trapped in a state of disaster, and their chances of recovery and subsequent sustainable development would be very much diminished. Programmes that provide more than initial relief, create a sustainable income, and help the poor to take advantage of the market to surpass the poverty trap, are vital if the world is serious about a lasting reduction of poverty.
Programmes, like LRF, who are willing and capable of providing a future of sustainability for the poor, require investments.
9) The organization: How does the initiative fit with your overall organization's strategic goals and priorities? How did the initiative start?
The All India Disaster Mitigation Institute (AIDMI) is widely recognized as one the most creative and innovative thinking activists. For example, AIDMI is invited to join the Tsunami evaluation coalition to conduct an evaluation of the US$ 1 Billion international response of 2005 Tsunami in 6 countries. Similarly, recently, AIDMI has received the request to review the performance of the Disaster Emergency Committee (DEC), a network of 11 UK based agencies evaluation coalition, which is implementing a ₤175 Million worth Tsunami project.
All projects and initiatives executed by the All India Disaster Mitigation Institute (AIDMI) aim at disaster recovery and risk reduction for poor and vulnerable communities struck by disaster. AIDMI has recognized the importance of addressing the four basic areas of human security in order to reduce disaster risk These areas are water security, habitat security, food security, and livelihood security and the organization is operational in all of these. LRF covers this last aspect.
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10) On the mosaic diagram, which of these factors is the primary focus of your work?
- Factor: Poor understanding of the human and social capitals of low income communities
- Principle: Design products and services that tap into the wealth of poor
- Other: NO.
Contact Information:
Name: Shri Mihir Bhatt - Honorary Director
Organization: All India Disaster Mitigation Institute
Country: India
Website: www.southasiadisasters.net
Organization's legal status: Registred Trust (NGO)
Number of Employees: 65
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