Paper

Assessing the Role of Microfinance in Fostering Adaptation to Climate Change

Studying potential of microfinance to fund adaptation to climate change
Download 38 pages

This paper analyzes the lending portfolios of 22 leading MFIs in Bangladesh and Nepal, in order to assess the synergies and potential conflicts between microfinance and adaptation to climate change.

Current policy debate has not emphasized delivery mechanisms that could channel adaptation resources to the poor, who are often most vulnerable to the impacts of climate change. The paper states that:

  • Core elements of microfinance make it attractive for facilitating adaptation by the poor;
  • Empirical analysis in Bangladesh and Nepal reveals that close overlaps already exist between ongoing microfinance activities and key climate change vulnerabilities;
  • Microfinance is already promoting some adaptation to reduce vulnerability to climate risks in these countries and, in some cases, also to climate change;
  • Climate change requires adjustment of existing microfinance programs and practices, as well as harnessing of new opportunities.

Financing microfinance for climate change adaptation is a critical challenge and better linkage with international adaptation funding can play an important role in providing initial support. Finally, expectations from any scaling up of microfinance for adaptation should be realistic.

About this Publication

By Agrawala, S. & Carraro, M.
Published