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Author: e-MFP

Increasing Resilience Among Low-Income Populations

It hardly needs saying that Climate Change represents the greatest issue we face today. Slowly – excruciatingly so – action is being taken at the macro level, reining in carbon emissions to attempt to keep global temperature increases within manageable levels. However, tacking Climate Change requires battles on many fronts, and not just on the mitigation side (minimising the actual Climate Change that takes place) but on the adaptation side too: how can we live in a world with a climate different to that we’ve had before?

This is the challenge selected as the theme of the €100,000 European Microfinance Award 2019, which launches mid-March. Entitled “Strengthening Resilience to Climate Change”, it highlights the important role of the financial inclusion sector in increasing the resilience of low-income and financially excluded populations vulnerable to the effects of Climate Change.

Being resilient is especially critical for these groups, which not only disproportionately earn livelihoods from activities most affected by Climate Change (especially agriculture, forestry and fisheries) but the countries and regions in which they live are also those which will be most affected, by flooding, drought, extreme storms, erosion, and pestilence. And many live in countries whose limited economic and institutional capacities already curb their ability to cope in the face of existing weather-related challenges, which Climate Change exacerbates. All these adverse effects may be multiplied by the growing risk of climate migration, displacing people to urban areas and across borders as refugees.

Already, these climatic changes are occurring with greater frequency and intensity, increasing risks to health, livelihoods, food security, water supply and economic growth. Climate change impacts and responses are closely linked to both human rights and sustainable development, which balances social wellbeing, economic prosperity and environmental protection. The Sustainable Development Goals (SDGs) provide an established framework for assessing the links between global warming and development goals that include poverty eradication, reducing inequalities, and climate action. SDG13 explicitly mandates “urgent action to address climate change and its impacts,” including strengthening resilience and adaptive capacity to climate-related hazards; improving education, and human and institutional capacity.

Although the challenge is daunting, there is an abundance of reasons to be positive. Within the agricultural, livestock, forestry and fisheries sectors, there is a broad range of emerging solutions, matched to the needs of vulnerable and low-income and financially excluded groups. What these solutions share is strengthening resilience. Resilient households adopt risk-reducing measures that help mitigate the catastrophic consequences of shocks; they demonstrate preparedness for future economic shocks; and they are able to smooth consumption without resorting to costly coping strategies, such as taking on unsustainable levels of debt or selling productive assets.  But resilience to Climate Change goes beyond managing shocks. It also entails adapting to permanently changed environments, for example a reduction in rainwater, a shift in the seasons, or higher temperature extremes. In both cases, access to financial services can help households to adapt.

Financial Inclusion and Climate Change

The financial inclusion sector has a hugely important role to play in addressing these challenges. In many cases, that means providing loans for working capital or investment in fixed assets; in other cases it is to support greater resilience to shocks, through products such as insurance; still more, it is to facilitate the long-term financial planning, including via savings products, needed to build more adaptable economic activities.

Moreover, because institutions in this sector are embedded in the communities they serve, they too are often vulnerable to the effects of Climate Change. To build resilience among their clients, these institutions must also become resilient themselves. That means adapting to the changing economic situations of their clients (including their debt-repayment capacity), as well as building systems that allow for rapid and effective responses following weather disasters, such as floods or hurricanes. It may also mean integrating climate monitoring and forecasting technologies into both strategic and operational decision making.

Finally, resilience may be pursued by complementing financial services with non-financial products and services, to fill capacity gaps through awareness-raising and capacity building concerning climate risks, such as technical assistance and training; developing standards that strengthen vulnerable populations’ resilience to Climate Change, and leveraging the opportunities of technology to lower costs, identifying and addressing sector-specific risks and barriers, forecasting extreme weather events and trends, conducting climate risk assessments, and providing information tools for climate risk screenings.

Eligibility for The European Microfinance Award 2019 “Strengthening Resilience to Climate Change”

The European Microfinance Award 2019 seeks to highlight organisations active in the financial inclusion sector that provide financial and non-financial products and services aimed at strengthening the resilience of vulnerable communities to the effects of Climate Change. The Award will look for initiatives that clearly respond to the problems caused by Climate Change, and demonstrate a proven or potential positive impact on the lives and livelihood of target groups.

To be eligible, applicants are organisations active in the financial inclusion sector that play an integral role in the provision of financial (and, where relevant, also non-financial) products and services focused on strengthening Climate Change resilience within low income, vulnerable and excluded groups. While many applicants will directly provide financial products and services, those that do not directly provide them must play an integral and ongoing operational role in the project to be eligible. As always, eligible institutions have to be based and operate in a Least Developed Country, Low Income Country, Lower Middle Income Country or an Upper Middle Income Country as defined by the Development Assistance Committee (DAC) for ODA Recipients. Relevant products and services must be fully operational for at least one year, and eligible institutions must be able to provide audited financial statements.

The application timeline, details of eligibility and more about the scope of the award can be found in the Explanatory Note that is published on the Award website in English, French and Spanish.

European Microfinance Award 2019 Selection Process

This year, and in response to feedback to a survey conducted by e-MFP last year, the selection process has changed a bit. There will be two application rounds: the first, which launches mid-March and closes on 9th April 2019, involves only a short application form and the provision of the audited financial statements, and will determine eligibility, innovation and relevance. Successful applicants will be invited to submit a more extensive application form by the end of May 2019 – with the exact date TBC. Both rounds will be evaluated by a Preselection Committee, before going to a larger Selection Committee of financial inclusion and Climate Change experts who will choose 7-10 semi-finalists and three finalists. A High Jury will choose the winner and the €100,000 prize will be presented on 21st November 2019 in the framework of the European Microfinance Week in Luxembourg.

We’re very pleased and excited to be launching the 2019 Award, and we invite all organisations working to increase the resilience of low-income groups to climate change to apply. We also ask and encourage any e-MFP members or other sector stakeholders to share this with your contacts and draw the attention of this Award to potential applicants. Keep a close eye on the e-MFP and Award website, and good luck!

Pour des informations sur le Prix et la procédure de présentation des candidatures en français, consultez le site du Prix

Consulte el sitio web del Premio para la versión española de la información sobre el Premio y el proceso de presentación de candidaturas

Photo: ©IFAD/Amadou Keita

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