Micro-Credit
The two primary sources of income in the region – tourism and fishing – were both seriously impaired by the tsunami. Recovery will be slow.
The traditional means of livelihood for many villagers will be unavailable for the foreseeable future owing to the loss of home, workplace and equipment. For some, there is little hope of replacing what was lost. The extended downturn in the primary industries of the region means that alternative job opportunities will be scarce.
Low income people do not have access to bank loans. Private money lenders, the alternative to banks, charge excessive interest rates. This makes it difficult for low income people to access funds for starting small-scale alternative income generation activities.
Chabad of Thailand intends to implement a micro-credit initiative in the region to extend small-scale interest-free loans to villagers and their communities for the start up of income generating activities, allowing them through self-employment projects to care for themselves and for their families.
One of the principle advantages of micro-credit schemes over outright cash gifts is the long-term sustainability of support through the recycling of the loan capital to new recipients as loans are repaid. Micro-credit initiatives have been used to great effect in countries around the region for decades and there is a wealth of expertise and best practices to borrow from
The disbursement of loans would in most cases not begin until a village or community has been resettled. This could be anywhere from 6 months to a year following the disaster. During the time prior to resettlement, preparations would begin. These preparations would include advocacy and training among the residents of the temporary relocation camps, formation of village groups or associations and establishment of the necessary legal and procedural mechanisms.
The key to effective micro-credit initiatives is community involvement. Three of the models that have proven effective elsewhere which seem appropriate for the Thai context are described below.
Village Banking
Village banks are community-based credit and savings associations. They typically consist of 25 to 50 low-income individuals who are seeking to improve their lives through self-employment activities. Initial loan capital for the village bank will be provided by Chabad of Thailand, but the members themselves run the bank. They choose their members, elect their own officers, establish their own by-laws, distribute loans to individuals and collect payments and savings. Their loans are backed, not by goods or property, but by moral collateral: the promise that the group stands behind each individual loan. Technical assistance and training in the management of the village bank will also be provided.
Association
In this model, the target community forms an 'association' through which micro-credit activities are initiated. Associations can be composed of youth or women. They can form around political, religious or cultural issues. They can create support structures for micro-enterprises and other work-based issues. An 'association' can be a legal body and thereby gains certain advantages, such as collection of fees, insurance, tax incentives and other protective measures.
Community Banking
The Community Banking model essentially treats the whole community as one unit, and establishes semi-formal or formal institutions through which micro-credit is dispensed. These institutions would be formed through extensive help from Chabad of Thailand and other local partner organizations who also train the community members in the various financial activities of the community bank. These institutions may have savings components and other income-generating projects included in their structure.