Wednesday
June 19
2019

Can Banks Play a Role in Improving Resilience to Climate Change?

By Dean Karlan, Rebecca Rouse, Laura Burke

In March of this year, Mozambique was hit by the first of two back-to-back cyclones, bringing with them hurricane-force winds and flooding that destroyed tens of thousands of homes and, with them, livelihoods. While the region is no stranger to cyclones, the magnitude and severity of these storms were unprecedented and highlighted the vulnerability of families who were caught in their paths. Economists James Riddell, Tanya Rosenblat and Dean Yang were working with a team in Mozambique at the time, studying the impact of an HIV/AIDS program, when the first cyclone hit. “We were initially investigating whether the HIV/AIDS program, which introduces Village Savings and Loan Associations (VSLAs) as part of its approach, improves the well-being of vulnerable families. When the cyclone struck, we realized that it was a chance to measure if and how the savings and loan component affects households’ ability to withstand the shock of this natural disaster,” Yang said.

As the effects of climate change become more pronounced, experts predict that communities throughout the world will continue to experience more extreme and erratic weather events. However, it doesn’t take a natural disaster of this scale to threaten families living at or near the poverty line—those living without a financial cushion or tools to manage risk can have the rug pulled out from under them for a variety of reasons, whether it be from a health emergency, the loss of a job or from a widespread drought that affects an entire community.

Photo courtesy of Sudipto Sarkar.

Source: International Banker (link opens in a new window)

Categories
Environment, Finance
Tags
banking, climate change, environment, financial innovation, financial services