Microfinance organisations and social vulnerability to climate change

Abstract

© 2016 Dr. AKM Nuruzzaman

Microfinance Organisations (MFOs) are working with more than 175 million families around the world. In theory they can be instrumental in reducing social vulnerability to climate change,yet their effect on social vulnerability to climate change has not been well demonstrated. 
 
 This study aims to explore the role that MFOs play in reducing social vulnerability to climate change in Bangladesh, a country that not only pioneered microfinance but also is one of the most vulnerable to climate change. Quantitative and qualitative data were collected through interviews with 60 households across four villages in a disaster-prone coastal area in south-western Bangladesh, along with observations and interviews with key informants. The quantitiative data was used to develop a social vulnerability index based on an assessment of livelihood capitals (human, physical, natural, financial and social), which was compared with different levels of membership with microfinance organisations to test for associations. Qualititative data was used to explain the results generated through the quantitative analysis. 
 
 The quantitative results indicate that households who have engaged with at least one MFO are less vulnerable than those who have not. Those who have engaged with more than one MFO, and who use the loans for business purposes, are even less likely to be vulnerable. The analysis not only provides evidence that microfinance organisations are valuable institutions for achieving sustainable adaptation, but also indicate that some of the most valuable outcomes of their services are the building of social and human capital. Despite this, some of the root causes of vulnerability, such as social marginalisation and gender discrimination are not overcome through the interventions of microfinance.

Open Access