How microcredit can help poor countries after natural disasters

Wednesday, January 31, 2018

BOTH, in different ways, worry about liquidity. And global warming may, indeed, be bringing meteorologists and financiers together. On January 18th, VisionFund, a microlending charity, and Global Parametrics, a venture that crunches climate and seismic data, launched what they billed as the “world’s largest non-governmental climate-insurance programme”. The scheme will offer microfinance to about 4m people across six countries in Asia and Africa affected by climate-change-related calamities.

Natural disasters are becoming more frequent and severe. They disproportionately affect poor countries, where many eke livings from vulnerable agricultural land. Yet it is often in the aftermath of disaster that credit is hardest to obtain. As non-performing loans rise and the perception of risk increases, microfinance institutions (MFIs) rein in lending; they receive little support from donors and relief programmes, which tend to favour humanitarian aid. Stewart McCulloch, VisionFund’s insurance boss, says that “recovery lending”—small loans with special terms—can act as a “safety net” by helping stricken households restart businesses.

Photo courtesy of Nicholas Bertrand.

Source: The Economist (link opens in a new window)

Agriculture, Environment
climate change, microfinance, smallholder farmers