Six Cross-Cutting Truths: Climate Shock-Proofing Women’s Financial Inclusion

Climate change is limiting women’s ability to earn, live, and prosper in almost every rural and agricultural geography on earth. Financial services have the potential to help women increase their resiliency in the face of changing climate – and perhaps help shock-proof their lives. This blog summarizes cross-cutting findings from a series of case studies highlighting Mennonite Economic Development Associates, Village Enterprise’s and SEWA’s climate-smart innovations from the FinEquity Community that use financial coupled with non-financial interventions that are seeing to improve women’s resilience to climate events. What are we learning?

Women are particularly vulnerable to climate change due to social and cultural norms 

Norms are built into day-to-day assumptions in family or community interactions as well as in law – these have a direct impact on the perception of a woman’s right to access resources or make different choices to shock-proof their livelihoods from climate shocks. Changing those systems can be instrumental, which we’ve seen at Village Enterprise and MEDA. For example, a primary goal for the Village Enterprise project was to change local policy and budget systems to ensure a more equitable distribution of resources at a local level, specifically for women. MEDA partnered with agricultural cooperatives to leverage gender experts who conducted trainings and helped update policies that resulted in an increase in the collection and use of sex-disaggregated data, which helped to increase lending to women, and increased leadership roles for women within cooperatives and the community.

Climate resilience is built on financial and non-financial solutions (like education) 

Both financial and non-financial solutions are essential. In some communities, climate change is still viewed as something temporary, so the first step is to educate people and help them accept that climate change is here to stay and stress that the imperative is to begin to plan for it. One partner said, “Changing mindsets is crucial – we know climate events will happen, but there are ways to plan, prepare, and strategically save/invest in tools to help make a business resilient or recover faster.” This change in mindsets was especially apparent in the Village Enterprise case, and training clients on the issue was important—in fact, training was critical across all three case studies. 

Women’s livelihoods need to become more climate-resilient through climate “shock-proof” adaption 

Women are still perceived as “high risk” by financial service providers (FSPs) in many geographies, and climate change is exacerbating women’s livelihood vulnerabilities. To mitigate the increased risks due to drought, floods, hurricanes, etc., FSPs need to ensure that their female clients are adapting their businesses to make them more climate “shock-proof” through the use of new technologies and prevention and adaptation measures. Village Enterprise provides training on climate-resilient business models and ensures enterprises can access multiple business lines that can continue to earn income in the face of a climate shock (e.g., they can earn despite a drought, flood, etc.). 

Climate-smart tools and technology are required to increase clients’ climate resilience 

All three projects in the case studies identified the need for climate-smart products (e.g., irrigation, solar lamps, water-resistant materials) to improve the resilience of their clients.  Each project also uses a blended finance model to ensure women’s access to these products. These blended models have included concessional lending, discounts, and grants. 

Financial risk mitigation takes different forms 

SEWA has already experimented with two different types of parametric insurance and continues to iterate, further pursuing how to diversify the climate risks that can be covered while trying to balance the diversification of covered members to reduce costs. For MEDA, risk mitigation measures take the form of increased savings from increased productivity in periods of non-climate shocks and more rapid recovery from climate shocks due to improved equipment. For Village Enterprise, risk mitigation is focused on two basic sources: a) savings and b) income sources from alternative businesses that were not impacted by climate events. 

The need to measure better  

Moving forward, the measurement of women’s climate resilience from project inception will be critical. The 2023 USAID Resilience Recurrent Monitoring System Report outlines indicators that can support this effort.

Local government partnerships can lead to alternative forms of financial sustainability 

Government plays an important role in creating blended finance pathways to create climate resilience for women. In the MEDA and Village Enterprise projects, local governments, either partially or in whole, have taken on elements of increased lending to women for climate-smart products or livelihood efforts, as well as being partners to an ecosystem of private, public, and civil society partners developed by these projects. This success was the result of two factors: 1) both projects involved government partners as advisors and technical partners in the projects from the start, and 2) the projects produced positive economic and political results in their local economy. Sustainability does not always mean that the private sector will make money on every client. These case studies also show that the government plays an important role in creating sustainable blended finance pathways to the financial and non-financial tools that create climate resilience for women. 

Conclusion

These three case studies demonstrate work in three very different geographies – Nicaragua, Kenya, and India – to support women in shock-proofing their livelihoods in the face of climate change and climate events. The similarities between these case studies were striking, especially the need to 1) take a market systems approach, 2) address social and cultural norms, and 3) work closely with local government to ensure the sustainability of programs. While increasing the climate resilience of women often seems insurmountable, these case studies show that through the use of a market systems approach, it is achievable.