Approaches of MFIs to Disasters and Climate Change Adaptation in Bangladesh

Working Paper
Approaches of MFIs to Disasters and Climate Change Adaptation in Bangladesh

Bangladesh is highly vulnerable to climate-induced disasters. Poor and vulnerable people
living in the country’s many disaster-prone areas are systematically excluded from access to
the formal banking systems. Microfinance Institutions (MFIs) provide the opportunity of
financial inclusion for these people. This paper reveals that MFIs provide credit, savings and
insurance products that contribute to livelihood development, though further effort could be
made to align these products with climate change adaptation needs. Some of the MFIs have
separate disaster management funds, which they draw on to assist their member households
when disaster strikes. Some of them offer disaster-related non-financial services, like
post-disaster relief and rehabilitation programmes. This paper argues however, that there is
potential for MFIs to develop their products and services further to more effectively promote
climate change adaptation, such as further involvement in disaster mitigation and
preparedness, introducing products tailored to needs, increasing loan size and availability,
introducing low-cost insurance schemes such as index-based crop and livestock insurance,
“greening” their operations, and offering small and medium enterprise loans and non-credit
support. Supportive regulations should also be developed. Further research in the form of
experimental design of microfinance combining financial and non-financial services to address
risks and vulnerabilities of climate change could provide additional knowledge on how to move

KABIR Mahfuz
SALEMA S. M. Kalbin