Photo by Md. Mahabub Hossain Khan/2016 CGAP Photo Contest
Building Resilience
Over the last few years, our world, economies, and markets have been enduring multiple crises with increased frequency and intensity—from climate disasters and health shocks to humanitarian crises. In view of all these crises, achieving just some of the sustainable development goals (the SDGs) by 2030—including eliminating poverty, hunger, and gender inequality—looks grim based on the current trajectory.
It is vital for any development agenda, including financial inclusion, to consider how poor and vulnerable households, who will be amongst the most affected by crises and have the least strategies and tools to anticipate and cope with them, can build resilience and adapt to the crises impacting their lives. So, what is the role of financial services in bolstering resilience?
Inclusive finance can play a key role in helping people living in poverty prepare for, cope with, and adapt to various shocks that vary in nature, intensity, frequency, and duration. While the role of financial services in promoting growth and poverty reduction is still debated and empirically unresolved, there is a robust evidence base showing that they can help prevent people from falling deeper into poverty.
For example, reliable savings and remittance products can help smooth consumption during periods of crises and help speed recovery after shocks. Credit products can help the poor invest in risk-reduction measures like irrigation, hardier seed varieties, or the transition into new livelihoods and diversified sources of income.
CGAP’s work on resilience over the past few years brought a deep analysis into the role financial services can play in mitigating humanitarian crises, particularly for the forcibly displaced. More recently, we shared insights around the COVID-19 pandemic and inclusive finance in terms of the response of the MFI sector, and the emergence of government-to-person payments, and the role of agent networks in extending digital financial services and ultimately expanding financial inclusion. CGAP is also working on understanding how financial services can build climate resilience for people living in poverty and for rural women, in particular.
Going forward, we are looking forward to collaborating with funders as we explore ways in which they can improve financial market systems in fragile countries that provide their populations with tools to build long-term resilience.
In view of the frequent and intense crises witnessed in recent years, it is vital for any development agenda to consider how poor and vulnerable households, who will be amongst the most affected by crises and have the least strategies and tools to anticipate and cope with them, can build resilience and adapt to the crises impacting their lives. Inclusive finance can play a key role in helping people living in poverty prepare for, cope with, and adapt to various shocks that vary in nature, intensity, frequency, and duration.
Fragile countries are behind—and falling further behind—their nonfragile peers in measures of poverty and financial inclusion. Inclusive finance plays a critical role in building resilience for low-income people living in fragile contexts.
The world has changed dramatically in the last few years, from climate change to political unrest. What role can inclusive finance play in building resilience for people facing crises?
While the need to expand opportunity for the poor has historically animated the financial inclusion community, it is high time we recognize the equally critical role of resilience building and expend similar effort in service of that goal.
Women, especially those in low-income countries, are faced with higher risk, greater vulnerability, and fewer tools to cope with the impacts of climate change. Financial services can empower women to manage climate risks and build resilience.
Cash-in/cash-out agent networks are key to extending digital financial services and ultimately financial inclusion. Providers have struggled to extend these agent networks in rural areas, where sparse populations lead to lower transaction volumes and weaker financial incentives for businesses to serve as agents.
Despite gains in financial inclusion, several populations at the "last mile" remain excluded. This Note, prepared by CGAP, the World Bank, and the Better than Cash Alliance for GPFI, provides a framework for the necessary public infrastructure and regulatory enablers to reduce the barriers commonly faced by these last mile segments and emphasizes the need for more targeted policies and investments to address non-financial barriers.
Afghanistan’s hawala system plays a critical and evolving role in the country’s financial ecosystem. Since August 2021 its role has only expanded as trust in the banking system faltered. Although hawala faces local competition and international skepticism due to transparency concerns, it remains a vital financial tool. The paper suggests that stakeholders should deepen engagement with hawala networks, support their regulation and formalization, and explore innovative partnerships to advance financial inclusion.
Inclusive finance can bolster resilience and unlock opportunities for low-income people in fragile countries. CGAP identifies three levers of change for funders: leveraging humanitarian cash transfers, understanding informal financial services, and improving local market facilitation.
CGAP's Impact Pathfinder provides insights into the role of financial services in building the resilience of vulnerable populations and small businesses globally.
Microcredit can help MSEs create jobs and build resilience but often falls short on growth. The Impact Pathfinder highlights credit’s opportunities and gaps, stressing the need for better financial products and support to boost employment.
AI-powered chatbots can be transformative for rural women by providing accessible, real-time agricultural advice, improving productivity, and fostering financial independence. Challenges must be addressed to ensure their full impact and inclusivity.
