Microfinance Loans

Grameen Foundation and Oxfam America released a new report which examines the critical role microfinance institutions (MFIs) can play in mitigating the impact of climate change on poor people. Written by Asif Dowla, a noted microfinance expert and professor of economics at St. Mary’s College, the report, Climate Change and Microfinance, points to some of the key poverty-related issues that need to be addressed next week at the United Nations Climate Change Conference in Copenhagen.

Global warming is expected to have the greatest impact on Africa, Asia and Latin America, the regions with the poorest people. For the millions already living on the margins, the shocks—increasingly intense natural disasters, disease outbreaks and falling agricultural productivity—could push them even further into poverty. Noting the active role MFIs already play in these communities, the report highlights challenges facing them, particularly those working in agricultural regions, and provides recommendations for “climate-proofing” their existing services, including offering insurance for the most vulnerable activities.

“Microfinance institutions already provide a vital link to financial security for millions of poor people, making them a valuable intermediary in serving these disadvantaged communities,” said Alex Counts, president of Grameen Foundation. “These institutions’ ability to adapt and adjust to the demands of climate change will, therefore, have a significant impact on their clients and the communities they serve.”

Pointing to the experiences of Grameen Bank in 1998 when two-thirds of Bangladesh was flooded for 13 weeks, MFIs in Central America that faced Hurricane Mitch, and the devastating 2004 tsunami in Southeast Asia, the report offers several core recommendations. To help clients, as well as the institutions, better prepare for and recover from disasters, MFIs should:

Reconfigure loans and savings products and increase availability of health, livestock and other weather-related insurance Introduce and expand the use of renewable energy, such as solar, to relieve energy poverty Develop disaster plans and create disaster funds both at their head and local offices Collaborate with national governments and other civil society organizations to prepare a National Adaption Program of Action.

“Despite the enormity of the problem, the microfinance community has been largely silent about climate change, except for some initiatives focused on green microfinance,” said Asif Dowla, who currently serves as the Hilda C. Landers Endowed Chair in the Liberal Arts Department of Economics at St. Mary’s College. “While these efforts are laudable and should continue, microfinance institutions need to be more proactive in developing long-term plans for natural disasters and other consequences of climate change.”

Source :
infoZine