Challenges of climate change & opportunities for financial inclusion

  • Anup SINGH, MSC (MicroSave Consulting)
  • Jonna BICKEL, Agronomika Finance Corporation (Philippines)
  • Ricardo NARVAEZ, F3 Life / Global Innovation Lab for Climate Finance
  • Annalisa BIANCHESSI, Microinsurance Network
  • Carlos ARANGO, RARE


Anup SINGH opened the session with a presentation that showed that the impact of climate change is most severe for people with low and moderate incomes. In addition to loss of livelihoods, these people suffer from climate change through loss of assets, negative health impacts, and climate-induced migration. Subsequently, financial institutions suffer from increasing direct expenses of managing operations, higher portfolio at risks, and loss of interest from investors to re-invest in their institutions.

Further, Singh talked about the World Bank’s financial inclusion framework for climate change resilience. The framework proposes financial instruments from different organisations depending on two major factors. First, the World Bank distinguishes between ‘more intense events’ and ‘smaller events’. Secondly, ‘poorer households’ have different needs from ‘richer households’. Depending on the size of the event and the income level of the target group, there is a bigger role to play for financial service providers, donors or governments. In most cases, combinations of different instruments, such as international aid and social insurance, are required.

Next to these combinations of insurance, credit, savings and subsidies for disaster risk financing, other ways to improve financial services for people affected by climate change include: use of risk management services, partnerships, green finance and climate smart technologies, disaster plan and disaster recovery funds, enabling regulatory frameworks, reliable and useful data, and technical capacities of financial institutions. 

Carlos ARANGO presented the Fish Forever programme of Rare. The programme aims to establish community-based management for sustainable fishing and to increase adaptation to climate change in coastal fishing communities in developing countries. The financial resilience component of the programme is designed to facilitate financial inclusion as a resilience strategy. The programme does not provide financial services. Instead, it creates mechanisms for financial service providers to provide services to coastal fishing communities. It also tries to understand and strengthen the trade relationship between fishermen and their buyers, which in many cases is a driver of overfishing. 

Fish Forever uses the OurFish app to collect and unlock data from transactions between fishermen and fish buyers. With the app, buyers register quantities, price, fish species and suppliers at the moment of purchase, as well as the price of fishing input such as gas, ice and working capital. Fishermen receive an identification card with their name and a QR code. Besides the practical benefits of the identification card for individual data collection, a positive side effect is that fisherman recognise themselves as business owners when they receive such a card.

The programme uses the transaction data to provide feedback to buyers and fishermen to improve their understanding of the business and over time creates income statements that fishermen and buyers can use to access services from financial institutions. 

In Myanmar, a 1-year pilot of OurFish app registered sales with a landing value of USD 2 million and a volume of 327 tonnes with 309 registered fishermen; in Honduras a fish buyer secured a USD 400 loan using records from OurFish app. 

Jonna BICKEL presented their Agri-Lending programme in the Philippines with Kennemer Foods which facilitates the integration of smallholder coconut farmers into cocoa value chains through crop diversification and multi-cropping. The programme has set up aggregator networks to provide inputs such as fertilisers, farmer training on intercropping for rehabilitation and improvement of soils, post-harvest assistance, and buy back guarantees to smallholders. 

The partners jointly originate, validate and approve the business cases of participating farmers including factors which are crucial to successful cocoa farming such as soil health and access to water. The programme only provides in-kind support in cooperation with input suppliers and providers of Technical Assistance. There are no cash disbursements. Risk mitigation is shared between Kennemer and Agronomika and consists of a mix of risk mitigation measures including an early warning system, insurance and farm take-overs. 

The programme has a large social and environmental impact including the planting of 1 million trees to reduce deforestation and prevent soil degradation. A challenge for the financial product design is the need to have a flexible budget, because rainfall differs every year and affects productivity. 

Ricardo NARVAEZ presented F3 Life, a climate-smart lending platform through which F3 Life provides tools. By applying Climate Smart Agriculture (CSA) practices, F3 Life aims to create a virtuous cycle to reduce risk of yield loss, create more resilient farmers and agri-lenders and achieve carbon sequestration and reduced emissions. The programme uses 4 steps to encourage farmers to start using climate-smart practices. First, the farmer signs a loan and land management agreement. Secondly, the farmer repays the loan and implements CSA practices. Thirdly, the programme monitors and provides a Climate-Smart Rating. Fourthly, the programme reports on impact.

F3 Life provides 3 tools. The first tool consists of designs of CSA farming practices for inclusion in loan terms. The second tool is a set of training materials for agri-lenders and funds. The third tool is an IT Platform for farmer compliance monitoring and impact reporting which goes live in January 2020. The partners on the platform include service providers (insurance), funders, environmental project developers, agri-lenders and third-party credit scoring engines.

F3 Life is currently piloting a project and the first lesson from the pilot is that the F3 Life process converts farmer awareness into farmer action. First results show a 100% uptake of CSA practices in comparison to only 15% in standard agri-environmental programmes. The second lesson is that farmers do not go “from zero to hero”. Instead, their loan sizes show incremental increases following stepwise introduction of products and services to the farmer. The third lesson is that climate-smart lending yields positive results for farmers, lenders and the climate.

Annalisa BIANCHESSI provided the insurance perspective on financial inclusion for climate change resilience. The role of insurance is traditionally one of risk transfer but with the onset of climate change and consequent widening of the insurance gap, there is increasingly a need for insurance to extend its role to include risk management and mitigation. Despite the important role of insurance for resilience of low-income populations, it is estimated that only 1 in 3 people in the world have some form of insurance. 

The insurance sector must develop risk transfer solutions on a macro-, meso- and micro-level to close the insurance gap. Partnerships, innovations, customer centric products providing real value to clients, sustainable, affordable and accessible products, and risk reduction strategies are all key. 

An innovative example of a scheme which combines risk reduction strategy and a macro-meso insurance policy is that developed for the Quintana Roo coral reef in Mexico1, a first of its kind scheme which provides protection from storm surges to the local residents and tourist industry. A Coastal Management Trust Fund, funded by the tourist industry, is the policy holder. The insurance policy provides payments for ecosystem restoration after damage based on a parametric trigger based on wind speed. 

On a micro-level, a catastrophic microinsurance2 developed by the Microinsurance Catastrophe Risk Organisation (Micro) and its partners provides a nice example of how an index-based insurance can provide microentrepreneurs and smallholder farmers with a form of protection from loss of income from excessive rainfall, drought and earthquakes. The scheme was able to reach 4,000 clients within its initial pilot phase (2016-2018) in Guatemala and El Salvador and to date (November 2019) has sold over 25,000 policies and is expanding to Colombia.

The key takeaway from the different risk transfer solutions is that insurance is one important tool from the entire toolbox to build climate change resilience, which requires a holistic approach.


Singh asked Arango how Fish Forever partners with financial institutions. Arango explained that Fish Forever and financial institutions can co-design financial services using the data from the programme. This data is crucial to understand cash flows of fisheries, which are highly impacted by changing weather patterns.

Singh then started a discussion about the role of government subsidies. Bianchessi argued that the need for subsidies depends on the type of product and target group. Certain products can be more sustainable without subsidies, while others require long-term partnerships with the government. Arango added that programmes like the Fish Forever programme can make remote communities visible for governments and can provide scientific data for management bodies to prevent over-fishing.

A member of the audience questioned the sustainability of financial solutions from the microfinance sector and asked the panellists if they see a need for proactive synergy between government donors and MFIs. Bickel said that having a large share of agriculture lending in the loan portfolio is a huge risk for MFIs. MFIs need a balanced portfolio and can reduce risks of agri-lending by moving into the value chain to secure investments. For example, by partnering with agronomic service providers to teach farmers to change practices.