ADB Grant to Help Restore Microenterprises in Tsunami-Hit Aceh and Nias
MANILA, PHILIPPINES - An ADB grant of US$2 million from its Japan Fund for Poverty Reduction (JFPR), financed by the Government of Japan, will help restore microenterprises and supporting microfinance institutions in the tsunami-affected Aceh province, as well as on the island of Nias, Indonesia.
About 80,000 businesses are estimated to have been lost to the tsunami, leaving not only massive job losses but the supporting financial infrastructure also severely damaged.
"The tsunami has led to huge financial losses for both individuals and financial institutions, and there now exists an understandable aversion to risk," says Tom Moyes, ADB Credit Specialist.
"Access to microfinance in Aceh has always been limited for micro and small enterprises. It is more important now than ever before to develop strong commercial microfinance institutions (MFIs) in Aceh and for these MFIs to find ways to expand service outreach to micro and small enterprises."
The project will pilot four microcredit schemes within at least three participating financial institutions. At least two schemes will follow Syariah principles of Islamic banking, where risks are shared between the financial institution and the entrepreneur, to help overcome the prevailing risk aversion.
The grant will provide $800,000 of funding to these four schemes, to be lent out at an average loan size of Rp5 million to around 1,500 microenterprises. The goal is to have at least two of the four schemes be further developed and expanded into commercial-scale lending operations.
At least four potential new livelihood activities identified by the project will be supported under the ongoing Earthquake and Tsunami Emergency Support Project, which is backed by a $290 million grant from ADB's Asian Tsunami Fund.
The grant is part of the $851.4 million overall assistance package ADB is extending to five countries affected by the tsunami. Of that overall figure, $671 million, or 79%, is grant funding.
The Bank Pembangunan Daerah Aceh is the executing agency for the project, which will be carried out over a twoyear period.
The JFPR was set up in 2000 with an initial contribution of Y10 billion (about $90 million). It now stands at more than $344 million.
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