Microfinance loans to help Kenyan families recover from El Niño

The UK Government through the Department For International Development (DFID) has issued a returnable grant of USD 1.5 million to World Vision Kenya that will be dispensed out as a loan to Kenyans affected by El Nino under the microfinance affiliate organisation of VisionFund Kenya. Residents based in Narok, Eldoret, Kisumu and Kabarnet counties will secure the loan through the microfinance organisation in World Vision Kenya Area Development Programs in the above counties. Targeted beneficiaries will be-existing business clients as well as interested new clients.

Mr. Dickens Thunde, World Vision Kenya National Director, says “recovery lending enables families to get back on their feet to become hunger-free. Integrating microfinance with our humanitarian response enables us to provide an even more robust response to El Niño and other disasters.”

It is anticipated that VisionFund’s Kenya recovery loans will help restore the livelihoods of around 18,000 families impacting approximately 40,000 children in the identified counties. El Niño rainfall is undermining the ability for many communities to become hunger-free and withstand the setbacks and shocks caused by the severe weather patterns.

“Thanks to the UK Government to World Vision and its microfinance partner, VisionFund International, families devastated by El Niño will have access to recovery loans to help rebuild their livelihoods” says Mr. Thunde.

The loans will target suitable individuals affected by El Niño, and may be larger and over a longer period than typical microfinance lending. The microfinance organisation targets business-minded individuals who have or might have had a business before it was destroyed or washed away the El Nino rainfall.  VisionFund branch staff will vet the loan clients following the normal procedure. The staff will access your business then you can join the list as new or previous client of the microfinance institution.

According to Mr.Thunde you need to have had a business as an individual or be or are part of a group. The group members will be your guarantees as you seek to apply for the loan that will be repaid after being issued with the repayment loan guidelines.”

With anticipated drought in West and Southern Africa and potentially severe flooding in East Africa. VisionFund will use the funds to provide additional resources in Kenya, Uganda, Rwanda, Tanzania, Malawi and Mali in order for them to issue recovery loans to their clients. Recovery loans to clients means that they will have additional funding from the loans to jumpstart their business or rebuild it. When the business is up and running you can repay the loan as per the stipulated time and arrangement by the microfinance organisation VisionFund Kenya.

“The loans will help to rebuild businesses destroyed by flooding and drought in order to restore economic independence to families, and provide economic stimulus to communities, as quickly as possible, says Mr. Thunde

Typically, after a disaster, there is a reduction in the supply of microcredit as local lenders suffer losses when loans cannot be repaid, yet this is a time when credit is most needed to rebuild communities. Lending after disasters enables people to rebuild their businesses more quickly and engage in income generating activities or businesses.

“This ‘hand up’ rather than ‘hand out’ approach empowers individuals to recreate their livelihoods and restore independence,” says VisionFund Kenya Chief Executive Officer (CEO) Philip Ochola. He adds that “from a financial perspective, it can attract commercial funding to allow greater scale in the recovery response.” This refers to commercial loans from Banks and other financial institutions, both local and international to support the recovery process of families affected by El Nino.

World Vision Kenya and VisionFund will work closely together to ensure that VisionFund’s recovery lending approach is closely aligned and integrated with World Vision’s immediate humanitarian response. Once individuals are ready to rebuild their businesses or start entrepreneurial activities, they may apply to VisionFund for a recovery loan.  It is another tool to help communities recover and VisionFund ensures that any financial risk has been properly assessed for those who receive a loan.

VisionFund pioneered a recovery lending on a smaller scale in the Philippines with great success.  In the aftermath of Typhoon Haiyan, VisionFund issued over 4,600 recovery loans and 96 percent of clients surveyed stated that the loans were helpful in restoring livelihoods with 49 percent saying they had fully recovered as a result of the loans.

The loans will be repaid in no instalments but as a whole amount once on or before 30th April 2017.