How Can We Improve Resilience Globally? Leading Experts Weigh In

Transcript 

Stéphane Hallegatte: People cannot afford to think first about floods and then the next day about economic risks and the next day about health. What they are looking for are solutions that can take into account all of those risks.  

Sophie Sirtaine: We really must strengthen resilience responses across the world to ensure that everybody, including low-income populations and small firms, have the ability to prepare for, face, manage and recover from shocks without having to reduce food consumption, taking girls out of school, relying on fire asset sales.

Ajay Banga: Financial inclusion has the potential to transform lives. It transforms entire communities, and it does this by empowering individuals as well as small businesses.

Lamis Daoud: We’re living in a world where extreme events are striking with growing speed and force. Regions across the world are coping with different risks unfolding simultaneously: geopolitical conflict… climate change… trade tensions… demographic shifts… cyber risks... and others. Unsurprisingly, these risks hit low-income populations and micro-and-small enterprises – or MSEs — the hardest… creating ripple effects with local to global consequences. And while government-led strategies are vital to help mitigate some of these challenges, escalating complexities and fiscal constraints mean that responses to shocks and stresses must be strengthened in a way that allows these communities to build their own resilience.  

Hello and welcome to this bonus episode of inclusive finance frontiers, a podcast by CGAP. I’m your host, Lamis Daoud.

Considering the increasingly fragile global landscape, CGAP recently brought together around 200 decisionmakers from around the world to discuss an overlooked solution for a more sustainable and effective resilience strategy: inclusive finance.  

Representatives from multilateral development banks, government agencies, development finance institutions, philanthropies, civil society and the private sector came together in Amsterdam for a symposium titled, Rethinking Resilience: Why Inclusive Finance Can’t Wait. CGAP CEO, Sophie Sirtaine, gave us an overview.  

Sophie Sirtaine: We have convened this symposium with a range of stakeholders from different sectors and from the public and the private sectors to spotlight really the critical role that inclusive finance should play in empowering low-income people and micro and small enterprises to navigate, adapt, and thrive amid uncertainty. Of course, this is critical into today's world because our world is actually facing a lot of urgent challenges. Now, what's really important to realize is that these risk are affecting low-income populations and micro enterprises the most in view of their livelihoods. This is because many are involved in agriculture or informal sectors, and many live in rural areas, informal urban settlements or even in fragile context.

On the one hand, the most affected by these increasing risk. On the other hand, they are among the least equipped to deal with such shocks. For instance, we know from the global Findex that more than a third of adults in low-income countries have personally experienced a natural disaster or an extreme weather event in the last three years, and that two thirds of these people have suffered a loss of income or assets as a result. We also know that up to 4 billion people are uninsured or underinsured in emerging economies. Now, it's also important to realize that if we don't address these vulnerabilities that low-income communities face, this can create ripple effects at a much broader scale.

It, of course, can create fiscal strains on governments, it can widen social divisions, and it can even create migration pressure. All of these can have consequences at national, regional, or even global level. Fundamentally, it poses threats to stability and development. That's why we believe at CGAP that we really must strengthen resilience responses across the world to ensure that everybody, including low-income populations and small firms, have the ability to prepare for, face, manage and recover from shocks without having to reduce food consumption, taking girls out of school, relying on fire asset sales. Fundamentally, a world that is resilient is one where everybody has the ability to rebuild assets and sources of income after a crisis.

Inclusive finance really provides an effective avenue to equip everyone, including low-income populations and micro firms, with the tools they need to absorb shocks and recover from these shocks.  

Lamis Daoud: Throughout the two days, participants shared experiences and ideas for the future, all with the ultimate goals of catalyzing action towards investing in inclusive finance solutions and empowering and building resilience for the most vulnerable to these risks. We spoke with a few participants on the sidelines about what they’re seeing, what they’re doing, where the future lies and how we can get there. [In this episode, we’re bringing that to you.]

Stéphane Hallegatte is the chief climate economist at the world bank. He helped shed a little light on what kinds of risks communities around the world are facing.

Stéphane Hallegatte: Big storms, big floods, earthquake risks, we see those events happening almost every week in the world. When you are in a community facing those risks, this is only part of what you're facing. You also have everyday risks, getting sick, having an accident, losing your job, maybe being robbed in places with a lot of criminality. And what's really important is when we offer a solution to people, not to work in silos, but to start from where people are, which is facing a huge array of risks and looking for solutions that work for this area of risk. People cannot afford to think first about floods and then the next day about economic risks and the next day about health. What they are looking for are solutions that can take into account all of those risks.  

Lamis Daoud: We spoke to Stuart Rutherford, who is the director of the Hrishipara daily diaries project, which collects data about, and provides insights into, how people manage money. For decades, he’s been working to understand how the poorest communities in Bangladesh, India, and South Africa use what little money they have.

Stuart Rutherford: If you are already low income, then you spend an inordinate amount of your time looking after the basics. You have really almost no choice but to spend a lot of time thinking, worrying and acting to make sure you get work, to make sure you get some income, to make sure you can buy food, shelter to look after your social relationships, look after your health, and if it's all possible, educate your children into a better future. In doing that, they spend an inordinate amount of time and effort and anxiety in financial transactions. So even before financial inclusion comes along from outside, they're already very busy doing a lot of saving and borrowing.  

Lamis Daoud: Why so much saving and borrowing? The overriding reason is just to deal with life when you have very weak and irregular income streams. And the borrowing? It’s mostly done informally. In one week, one of Stuart’s financial diaries might log a person borrowing 50 cents from a neighbor to buy some vegetables, five dollars as shop credit to buy books so their daughter can be let into school, $50 out of a microfinance savings account for crucial hospital tests, and maybe $200 borrowed from a family member in order to buy a rickshaw to drive and get some income… or to flood proof the house before an upcoming storm season.

Stuart Rutherford: It's only through understanding what they're already doing with their money and talking to them about it, that you can understand where the shortfalls are. And until you understand where the shortfalls are, you are in danger of bringing solutions that are looking for problems instead of starting with problems and finding solutions.

Lamis Daoud: So where do these solutions lie? Our symposium looked at some of the answers… one of them being insurance, which is increasingly recognized as a critical enabler of resilience. Take Kenya, for example. According to a study titled, why don’t the poor save more, people who were insured at the time of climate shocks were 96% less likely to sell off assets than people without insurance within the same communities. During unstable times, having insurance can be a game-changer for low-income families.

Michel Liès is the chairman of the Zurich insurance group and steering committee chair of the insurance development forum. We spoke to him about how insurance fits into the big picture of long-term resilience strategies.

Michel Liès: There is a fantastic alignment between our raison d'être and the word resilience. The insurance industry can bring a lot concrete to this discussion and also it can go along with what we are trying to do in the insurance industry moving from the famous post-event compensation to a pre-event preparation because it's 10 times more efficient.

Lamis Daoud: Michel thinks that parametric insurance is an especially effective tool for low-and-middle income communities. Rather than having what is often a lengthy and costly assessment of damages and losses that have occurred, parametric insurance provides coverage based on predefined indexes. Payments are automatically triggered when certain conditions or parameters are met. In an environmental disaster—this can be wind speed, rainfall levels or the magnitude of an earthquake—it eliminates the need for lengthy documentation processes and expedites payouts to communities, when quick access to cash is critical.

Michel Liès: A parametric event is totally objective. It's depending on something which is not defined by the insurance company, but which is defined by an index outside of the insurance company and it defines the level of payment. So, there is no bad surprise, there is efficiency, there is speed, and it is what we need in order to make the first insurance experience of the low-income community positive.  

Lamis Daoud: And according to Michel, the public and private sectors play a role in advancing inclusive insurance.  

Michel Liès: Role of the public sector is definitely to improve the knowledge, the understanding of what insurance can bring. And globally be public, private sector, I think it's important to be transparent about the cost of the decision that you take and the cost of the decision that you don't take. It would be very nice to have the public and the private sector speaking with one voice.

Lamis Daoud: When solutions like mobile banking, instant payments and digital wallets are more widely adopted in conjunction with insurance coverage, we’ll start to see more resilience in communities around the world.  

Michel lies: Digital technology is something wonderful. You will probably not start the digital contact with a client only by insurance, but you can definitely make of insurance a rider over something else, which can be a loan, can be whatever, saving products, the fact that digital allows you to approach people is an extremely added value. It's a unique opportunity to make our industry more efficient, more direct, more impactful.

Lamis Daoud: And we see how important digital inclusion is to the equation. The world bank group recently released the global Findex database of 2025. It’s the world’s only demand-side survey on financial inclusion, and a leading source of data on how adults around the world access and use financial services.  

In this latest release, the digital connectivity tracker was introduced, measuring access to – and use of – mobile technology in low and middle-income communities. From that, we see that outside sub-Saharan Africa, almost 85% of adults own a mobile phone… and they’re mostly smartphones. Yet poorer adults are 8 percentage points less likely to own a phone than richer adults… and women are 9 percentage points less likely to own a phone than men.

In addition to the digital inclusion gaps, Findex 2025 finds that around 1.3 billion adults worldwide still lack financial accounts of any kind. Affordability, access, and not having enough money are the top barriers keeping them financially excluded. But how do we close the gaps that exist… and do it quickly for the most impact? Sophie weighs in.

Sophie Sirtaine: First and foremost, gaps in financial inclusion needs to be closed, and they remain massive gaps. In fact, 1.3 billion adults remain totally unbanked. We know that the MSME, the micro and small enterprises financing gap is estimated at 5.2 trillion. What's more, we know that the gaps are larger where the risk are also higher. For instance, in climate affected countries, a third of adults are totally unbanked compared to one in 10 in the rest of the world. It's imperative to close financial inclusion gaps so people have access to at least the basic financial services they need to face, mitigate and recover from risk. But we also know that reaching the next billion people that are still financially excluded is becoming increasingly challenging because the groups that remain excluded are informal small business owners, smallholder farmers, women being harder to reach, rural areas and people in fragile contexts.

We're going to have to innovate and intentionally try to target them to close these gaps. In addition, gender gaps remain really persistent in a lot of countries. In fact, in 65 economies, you still see important gender gaps in financial inclusion. Now, why should we care about these gaps? Really because women play critical role in terms of resilience. They are often key decision makers for food, education, community well-being, and they often play frontline roles in climate action, biodiversity and even peace building. Closing critical gaps in inclusive finance is a priority, but another priority is really to integrate inclusive finance into national and international resilience building efforts, such as in disaster risk strategies, in fragility programs, and very importantly in climate responses. In all these cases, including finance would enable to channel funding through financial institutions and digital accounts directly into the hands of people in communities for them to increase their resilience to different risk.

For example, in Somalia during humanitarian crises, different organization partnered with a telecom operator Hormuud to deliver commission-free cash transfers to affected populations. That facilitated nearly $1 billion in aid transfers to 3.5 million people to whom it is providing crucial support within just days of the crisis.

That's why our symposium involved people from different sectors. We need others to see the role of financial inclusion and include them as part of the toolkit to enhance the effectiveness of their own programs. It is through breaking silos that we can effectively bring inclusive finance into national resilience strategies and international priorities to empower people to become active agents of resilience, stability and inclusive growth.

Lamis Daoud: Stéphane agrees that breaking down all the silos can lead to positive knock-on effects.  

Stéphane Hallegatte: The connection between people like me working on climate and people working on financial inclusion are really important, because they have this horizontal look at all of those risks and they help me break the silos and work with people on healthcare, for instance, so that the solutions we design are simple, effective, and meet the needs.  

Stéphane Hallegatte: When we offer people solutions to manage natural disasters and flood risks, what we see is these people will be able to invest more into their future. They will be able to pay more for education and healthcare for their kids. And so what we want to see is by reducing risks that we can reduce, we help people take more risks which are good for them, and this is where the big opportunities lie. If you protect against floods and you're thinking, how much am I saving? You will find very small amounts because poor people, [and] limited assets. But this is not what you're doing. If you protect this place against floods, you will have people investing in their dwelling, investing in economic activities, and you do much more than avoiding losses. You are triggering investments and you're triggering economic activities that will create incomes for people.  

So we have not to think only in a defensive term, like I’m investing to protect myself against risks. We also need to think more proactively about what are the risks that I want people to be able to take for their kids, for their economic and livelihoods, and for their future?  

Lamis Daoud: Addressing the audience at CGAP's symposium, world bank group president Ajay Banga summed it up.

Ajay Banga: Across all these efforts the better we do and the simpler we make it for users the greater will be the adoption and the transparency in economies, and over time that will really facilitate financial inclusion and resilience and change lives.  

Lamis Daoud: That’s the end of our podcast today. Thank you so much to everyone we interviewed: Sophie, Stuart, Michel and Stephane.

And of course, thank you, for joining us for this episode of inclusive finance frontiers, a podcast by CGAP. I’m your host, Lamis Daoud.  

For more information on our work in inclusive finance and other topics, please visit our website at cgap.org.  

And if you liked this episode, please be sure to share it with friends and colleagues so more people can hear how inclusive finance is transforming lives.