MANILA, PHILIPPINES (25 February 2005) - ADB has approved the reallocation of US$7 million from a Rural Finance Sector Development Project in Sri Lanka to provide emergency microcredit to tsunami-affected people in the country.

In the first ADB post-tsunami response after the joint preliminary needs assessment carried out by ADB, the Japan Bank for International Cooperation (JBIC) and the World Bank and published at the start of February, the reallocation will expedite the flow of needed funds to poor and low income tsunami-affected households.

Three loans totaling $70 million were approved by ADB in December 2003 for the Rural Finance Sector Development Program (RFSDP) to establish a sustainable system for enhancing access to rural and microfinance services.

Under the project, a $10 million line of credit to support microenterprise subloans of up to about $1,000 each was being disbursed through microfinance institutions. Some $7 million of this line of credit will be reallocated to help tsunami-affected households.

"The reallocation will allow an immediate and substantial response to restore livelihoods in affected areas through microfinance institutions," says Ashok Sharma, Principal Rural Finance/Microfinance Specialist.

"Emergency credit will help them quickly overcome the massive disruption and shock they have experienced to their livelihoods and income sources."

After graduation from the emergency credit, affected households will be continuously assisted for further development of their microenterprises and job creation. The reallocation is expected to reach 14,000 households.

"This response will combine with cash grant and public works programs supported by other external partners and the Government, continuing the good tradition of cooperation reinforced by the joint needs assessment," says Alessandro Pio, ADB's Country Director in Sri Lanka. "Restoring the capacity to generate income is a first crucial step towards renewed self-reliance. It is important that these programs have uniform terms and conditions, in line with the Government's schemes, in order to avoid confusion and disparities".

Sri Lanka will need more than $1.5 billion for its reconstruction and rehabilitation effort following the December tsunami disaster, according to the needs assessment. The disaster left at least 31,000 dead in the country and destroyed an estimated 400,000 jobs in 200,000 affected families, of which three quarters were already poor and low income households.

ADB plans to process approximately $150 million in new operations in the short to medium term, devoted to the reconstruction effort in Sri Lanka. Reconstruction in tsunami-affected areas will be coordinated with ongoing post-conflict interventions, and will make use of existing project implementation structures, to ensure speedy and adaptive implementation.

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