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UNRWA Emergency Appeal Pro G Ress Re P Ort UNRWA Headquarters Gaza Department of External Relations Telephone: + 972 8 677 7720 Fax: + 972 677 7698 email: [email protected] website: www.unrwa.org UNRWA Emergency Appeal Pro g ress Re p ort Destroyed housing, Khan Younis Refugee Camp, Gaza Strip 10 Tenth progress report covering September 2001 Emergency Appeal This is the tenth progress report in UNRWA’s emergency appeal series: flash appeal launched 4 October 2000, first emergency appeal launched 8 November 2000, second emergency appeal launched 22 February 2001, and third emergency appeal launched 22 June 2001. This progress report covers the period 1 – 30 September 2001 Background The UNRWA microfinance and microenterprise programme offers one barometer for gauging economics and livelihoods trends in the West Bank and Gaza Strip. During September, the situation of the programme in the West Bank, and the implications it holds in terms of livelihoods, were reviewed from the start of the present crisis in September 2000. Since the start of the crisis, the financial performance of the Agency's microfinance programme in the West Bank, like that of its sister programme in the Gaza Strip, was weakened by the economic shocks suffered by its borrowers and the recessionary forces squeezing the economy. During the financial years 1998 through 2000, the programme had been operationally self-sufficient, paying all expenditures from interest revenues. Despite the political and humanitarian crisis, it maintained full cost recovery until August 2001, when it incurred a small loss due to the slowdown in lending and mounting overdue payments by its clients. The following charts depict these effects on the operations of the programme and the increasing risk it has faced. Effects of the Crisis on UNRWA's Microfinance Programme - West Bank 1200 $1,400,000 $1,200,000 1000 $1,187,857 $1,000,000 800 $800,000 $736,813 600 $679,668 $600,000 $516,668 Value of Loans Number of Loans 400 $400,000 200 $200,000 0 $0 Third Quarter 2000 Fourth Quarter 2000 First Quarter 2001 Second Quarter 2001 2000-2001 Number of Loans Value of Loans The chart above shows that at the onset of the crisis the programme was delivering 1,095 loans valued at US$ 1.88 million. As the crisis deepened, this fell to 509 loans valued at only US$ 0.52 million by the end of the first quarter in 2001. Although it achieved a slight recovery during the next quarter when it disbursed 673 loans valued at US$ 0.74 million, throughout this period the productivity and value of lending in the programme dropped by 40 per cent. As a result, the programme had to meet its costs from a lower volume of lending, which produced reduced revenue. At the same time, an increasing range of risks contributed to a lowering of the cost recovery of the programme. Thus, from the end of September to the end of December 2000, the on-time (no days late) monthly repayment rate of the programme fell from 64 per cent to 23 per cent, and then flattened out at 21 per cent for the first half of 2001. This was mirrored by an increasing portfolio past-due rate, that rose from 13 per cent at the end of September 2000, to 38 per cent at the end of the next quarter, then rising again to 53 per cent in the next months as clients fell behind in payment. In the next quarter a partial recovery was gained when it dropped to 49 per cent. Risks in the Portfolio 70.00% 64% 60.00% 53.48% 50.00% 48.81% 40.00% 37.91% Percent 30.00% 23% 20.00% 21% 21% 12.69% 10.00% 0.00% Third Quarter 2000 Fourth Quarter 2000 First Quarter 2001 Second Quarter 2001 200-2001 Past Due Rate On-time Repayment Rate These indicators demonstrated the financial squeeze being faced by most businesses, with nearly 80 per cent of businesses generating insufficient income to meet their credit commitments, the salaries of their workers and the needs of their families. To cope with this, most businesses have laid off part or all of their workforce, while many of the smaller businesses have reduced their workforce to just family workers. When these businesses are unable to pay off their loans and other credit commitments, they are unable to renew the working capital, raw materials and assets needed to start the next production or sales cycle. This results in business downturn and stagnation that trap enterprises in a credit squeeze where they are unable to make their accounts payable to creditors or collect their accounts receivable from customers, who are also caught in the same vicious cycle as themselves. UNRWA Emergency Appeal Tenth Progress Report: September 2001 2 There is speculation that the collapse of the Palestinian economy has reached such a low state that even under best conditions it may take years to recover lost orders, restore assets, repair the credit system, re-establish lost jobs and create business confidence. Real recovery cannot begin until the current political and humanitarian crisis ends, while a stop-start process of political talks is viewed as unlikely to be sufficient to produce the longer-term stability needed for economic recovery. It is to be noted that in a situation where by some estimates one family in every seven may have lost its source of income and where almost half of all households may have lost half of their family incomes, more and more people will be living in poverty. If trends are to continue, increasing numbers of people will be unable to meet the basic needs of their families from either social support networks or relatives. The long-term impact of the crisis in economic terms was confirmed in the September overview report of the Office of the United Nations Special Coordinator in the Occupied Territories (UNSCO).1 According to this report, the sustained deterioration in the Palestinian economy suggested that recovery will take longer than after previous periods of recession, even if political progress allowed full lifting of closures and the return to work of all Palestinian workers previously employed in Israel. Pledges to UNRWA’s Third Emergency Appeal increased considerably over the period 15 September to 15 October, and reached 65 per cent of the US$ 76.9 million required. However, contributions actually received amounted only to US$ 8.3 million, or less than 11 per cent of funds required. UNRWA relief activities nevertheless picked up again during September with the arrival of new consignments of food in the Gaza Strip, enabling food distribution to recommence. Emergency employment creation • In the Gaza Strip during September a further 1,585 persons were hired under UNRWA's emergency employment programme. This brought to 8,494 the total number receiving temporary employment since the programme started in January 2001, of whom 1,794 have been women. A total of some 67,488 dependants are believed to have been supported through these activities • In the course of the month a total of 3,313 contracts were active, attached to various departments within the Agency’s Field Office and Headquarters in Gaza. Among these were 551 guards at schools and other Agency installations, 507 sanitation labourers, 469 school cleaners, 490 teachers and school supervisors. • The paving of sandy alleyways in the refugee camps of the Gaza Strip continued. Approximately 15 per cent of the 191,800m² work planned under the first and second emergency appeals has now been completed. • Contracts for the reconstruction of 82 shelters belonging to refugees registered as Special Hardship Cases were awarded, bringing to 110 the total number of contracts. 1 “Impact on the Palestinian Economy of Confrontation, Border Closures and Mobility Restrictions, 1 October 2000 to 30 June 2001”, UNSCO, September 2001. UNRWA Emergency Appeal Tenth Progress Report: September 2001 3 • A contract for the construction of six classrooms at one Agency school was awarded, bringing the total number of classrooms contracted to 28. Another 17 classrooms are in the awarding stage and 12 others under design. • A contract for the construction of a school in Nuseirat refugee camp was awarded. Contracts for two other schools in Jabalia camp are in the awarding stage, while another in Bureij Camp is currently being designed. • A contract for the construction of a warehouse roof in the Agency's Field Office in Gaza was awarded, and the site turned over to the contractor. • Maintenance work on 51 toilet units at several UNRWA schools in the Gaza Strip continued, and the paving of yards at several schools was begun. • In the West Bank in September, UNRWA offered temporary employment to 624 individuals, 277 of them women, in connection both with the Agency’s regular programmes and with its emergency operations. Among these were 61 teachers, 20 social workers, six engineers, five physicians, 14 nurses, and 23 school counsellors. For unskilled workers, UNRWA provided short-term jobs for 25 guards, 25 janitors and 65 sanitation labourers. The wages paid to these employees are believed to have helped provide for 2,853 dependants. • Since January 2001, in the West Bank UNRWA has given direct, short-term employment to 2,489 individuals, 1,560 men and 929 women, within the Agency’s various programme departments. Their dependants number 10,854. • There were seven maintenance projects underway at UNRWA installations in the West Bank during September, including its boys’ school in Hebron, three vocational training centres in Qalandia and Ramallah and health centres in Doura and Auja. Recreation facilities in the Jenin, Dheisheh, Balata and Qalandia refugee camps were completed during the month. These open areas include slides, swings and carousels, and where possible have been built with ramps for disabled access.
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