The cash after the storm: building resilience to future disasters

Typhoon Haiyan struck the Philippines in November 2013 with the ferocity of a category five super-typhoon, the most severe storm to hit landfall ever recorded. The storm claimed more than 6,000 lives, affected 4.1 million people and caused £9.39bn in property damage.

While natural disasters are the norm in south-east Asia, Haiyan was a reminder that the frequency, severity and complexity of these storms are increasing dramatically. In Nepal, for example, upcoming monsoon rains will exacerbate damage from recent earthquakes, causing more landslides and further damaging infrastructure, and highlighting the need for effective disaster resilience planning in the region. Looking back at our work in the Philippines, can we draw parallels for building community resilience after other disasters?

After Haiyan, we asked ourselves why populations who live with recurring natural disaster aren’t better prepared? What could be done for households to cope in cycles of crisis and how could we address immediate needs while building resilience for the future?

In municipalities hardest hit by Haiyan, entire livelihoods were destroyed. Many had relied on coconut as their primary source of income, but up to 80% of coconut crops were destroyed. The picture was similar for the larger agriculture and fishing sectors, as inputs were washed out to sea and retail markets destroyed.

To meet people’s basic needs post-typhoon and enhance financial inclusion for future disaster resilience, we provided unconditional emergency electronic cash transfers (e-transfers) and access to longer-term financial services. This provided a pathway from relief to recovery, with households gaining access to financial services through a mobile bank account. E-transfers also helped village-level businesses recover as recipients could choose where to spend their money.

But how do financial services build resilience? Our experience has taught us that they allow vulnerable households to access savings, loans and insurance products that can protect their families, property and businesses in the event of a disaster. For example, loans allow people to diversify their sources of income into ones that aren’t as prone to disaster damage. Insurance can help them access cash in the event of the death of a primary income earner, or if their property is destroyed. And having savings means people have money to buy what they need immediately following an emergency.

During Haiyan, we worked with the Philippines first mobile microsavings bank BPI Globe BanKO. Having an existing relationship with it helped us get the programme off the ground – with transfers provided to 25,480 households in the Visayas region, who were selected based on those that were prioritised by the Department of Social Welfare and Development (DSWD) plus additional verification related to the level of housing damage.

It was all pretty straightforward. To receive the e-transfers, people opened a BanKO mobile savings account and received sim and ATM cards as part of the account activation. Recipients could use the account for savings, access payment products and apply for credit and insurance. At the same time, users received SMS and voice messages on financial literacy that we hoped would encourage them to save and promote better household financial management. This extra component, our impact evaluation showed afterwards, led to the increased use of both formal and informal savings products among those who recalled receiving the messages.

But sending e-cash transfers to 25,480 households was not without its challenges. Recipients had to have access to a convenient agent network to cash-in and cash-out using their sim. Although BanKO had 4,000 agents nationwide, primarily located in pawn shops and sari-sari shops (Philippine convenience stores), there were only 46 located in Mercy Corps’ target areas following Haiyan. Demand outstripped the number of agents available. Additional problems arose due to limited liquidity initially, long lines and large distances between recipients’ homes and their closest agent, which made the cost of cashing out high. In an emergency response, we need to ensure agents are immediately available in the targeted areas.

Technology problems can also delay humanitarian efforts. Although Mercy Corps and BanKO had a relationship before Haiyan, we faced several key challenges in implementing e-transfers, at least 80% of which were technology-related. We learned that you need to ensure the e-transfer provider has sufficient internal capacity to address technology and client issues, such as sim card deactivation and forgotten passwords. These can lead to significant delays in sending e-transfers and a loss of confidence in the financial institution. To implement an e-transfer programme at scale and in a relief setting, there must be a robust financial service provider and a bulk payment product to ensure cash gets to those who need it fast.

Keep the big picture in mind and be flexible. Our impact evaluation found small changes and low-cost additions to the e-transfers resulted in significant benefits. Distributing the e-transfer as a lump sum, rather than three staggered payments, resulted in recipients investing in a larger number of productive assets, such as small livestock, which helped them supplement their income and food. Combining e-transfers with brief, tailored financial literacy messages increased savings and facilitated the uptake of financial services.

Above all, building relationships is key for long-term resilience. For recipients to save and use other financial products, they must have confidence that the financial institution will be responsive to their needs. If not, the relationship between the financial institutions may never go beyond the immediate e-transfer.

Initially, BanKO and Mercy Corps had an overly optimistic view of the ease of linking the mobile accounts to longer-term financial products. During the programme, BanKO adapted its techniques to market financial products, including creating material with pictures (and fewer words) and shifting to smaller, more informal presentation styles that resonated with these disaster-affected clients. It needed to incentivise them to keep money in their mobile account rather than immediately cash-out. Any financial institution involved in a project like this must be transparent and accessible to its clients, with strong education and customer service mechanisms.

E-transfers are not suitable for all emergency responses though. We used them in the Philippines based on our relationship with BanKO, existing technology infrastructure and high rate of mobile phone usage. When local markets are functioning, using e-transfers can be a flexible and empowering form of emergency assistance, while access to savings and credit and insurance can build disaster resilience and stimulate markets. A starting point to explore if e-transfers are the best option is Mercy Corps’ E-transfer Implementation Guide for Cash Transfers and the Electronic Cash Transfer Learning Action Network (elan).

As we look for effective solutions to build disaster resilience, our experience and research have direct implications on how we and other organisations respond in Nepal. Factors that influence decision-making include levels of functioning infrastructure, literacy and mobile phone usage rates. Consequently, as part of the recovery efforts in Nepal, we will opt for direct cash delivery rather than e-transfers.

Anna Chilczuk is Mercy Corps’ regional director for east Asia and Thea Anderson is its senior adviser for financial inclusion. Mercy Corps and BanKO were recognised by GSMA’s 2015 Global Mobile Award for the best use of mobile in emergency or humanitarian situations.

• This piece was amended on 24 June 2015 to correct the location of the banking agents working with Mercy Corps. There were 46 located in Mercy Corps’ target areas, rather than 46 working across the whole typhoon-affected region as previously stated.
  

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