Lessons from a microfinance recapitalisation programme

Following a major disaster, microfinance institutions (MFIs) often face high levels of bad debt, which may require the institutions to be recapitalised. This paper describes a recapitalisation programme implemented by the SANASA movement of Sri Lanka in 390 microfinance societies following the December 2004 tsunami, and highlights lessons for other similar programmes. MFI recapitalisation is a good use of funds in post‐disaster situations. To create successful programmes, donors should expect to relax some of their usual project requirements and MFIs should focus on maintaining credit discipline.