Financial Instruments to Strengthen Women’s Economic Resilience to Climate Change and Disaster Risks



Disasters brought about by natural hazard events and extreme weather conditions affect men and women differently. Differences in socioeconomic status, ability to access resources, and prevailing social and cultural norms between men and women impact the way they respond to and are affected by disasters. Given the low rate of women’s participation in the labor force and that women are mostly self-employed in the informal economy, they are more likely than men to live in the poorest households. With frequent exposure and high vulnerability to shocks, and with less ability to cope and recover from them, women may have limited ability to withstand the impact of disasters that cause financial shocks and economic distress. Women’s economic resilience to disasters is a result of how well women are prepared for and able to cope with such events.

Financial inclusion is a state in which everyone, especially vulnerable people, has effective access to a wide range of financial products and services (savings, credit, insurance, remittances, and payments). Financial inclusion enhances women’s economic resilience to disasters by providing them access to various types of financial instruments. Use of relevant and appropriate financial instruments enables women to prepare for and cope with the effects of disasters. An important element of financial inclusion is financial literacy—which is achieved by providing individuals with the knowledge, information, and tools that enable them to make informed financial decisions that in turn can prepare them for unexpected financial shocks brought about by disasters.

Financial inclusion enhances an individual’s or household’s level of preparedness for disasters.
By using credit, savings, and/or insurance, individuals, households, and businesses can anticipate, prepare, and eventually absorb the negative impacts of a disaster by creating assets, smoothing consumption, and accessing emergency assistance. Financial inclusion boosts an individual’s or household’s ability to cope during and after a disaster.

When an individual has an account in a financial institution, cash transfers from government and remittances from family and friends can immediately be facilitated in the event of a disaster. Also, access to credit facilities can provide the resources needed for recovery and reconstruction after a disaster, making it possible to rebuild faster and better. Savings and proceeds from insurance claims may also be used to finance restoration, rebuilding, and recovery-related activities. Immediate access to funds (either through emergency credit or savings) helps smooth income and consumption right after a disaster. Digital financial services play an important role in financial inclusion and enhancing economic resilience to disasters. Digital financial services provide a cost-efficient way to reach and provide financial assistance to the most vulnerable people.

Recognizing the importance of financial inclusion for poverty alleviation and inclusive growth, various countries developed and implemented their own national financial inclusion strategies. Countries that have adopted a strategic policy approach to financial inclusion have contributed to an improved state of financial inclusion worldwide. The proportion of the global adult population reported as unbanked declined from 49% in 2011 to only 31% in 2017. However, gender disparities in account ownership persist, with male account ownership at 72% versus female account ownership at 65%. The 2017 Global Findex reported that the 7-percentage point gender gap has not changed since 2011 among developing economies. Despite the importance of financial inclusion for women, they still comprise 56% of all unbanked adults.

Women face multiple barriers to accessing and using financial services. Most of the barriers are a result of sociocultural practices and societies’ perceptions of women, but some barriers are institutional or merely infrastructure related. The latter include women lacking an identification (ID) card to prove their identity, having insufficient or no traditionally required collateral, facing mobility constraints, and having limited financial literacy. Other barriers to women’s account ownership include their concerns about the cost of an account and perceptions of the utility of accounts, a lack of sex-disaggregated data on the use of financial products, a lack of financial products that cater to women’s needs, a lack of credit history, and the high costs of dealing with financial service providers (FSPs).

Women are often more vulnerable than men to disasters because basic services and assistance are “gender neutral” and do not consider unequal gender roles and discrimination women face in many societies. In times of shock or disaster, men’s and women’s capacity to access emergency funds may differ. Men are more likely than women to be able to access emergency funds. During emergencies, men use their earnings from work as a source of emergency funds while women tend to rely more on savings and money received from family and friends. Gender-responsive financial mechanisms that enable access to financial services reduce women’s vulnerability, strengthen their capacity to cope with natural hazard events, and help ensure that they are not left behind when economies rebuild.

Relevant financial instruments may be used to increase women’s level of preparedness and to enhance their abilities to cope with shocks. Financial instruments that increase a woman’s level of preparedness include those that enable women to reduce risks, be prepared for disasters, and transfer such risks to insurance companies. In the event of a disaster, financial instruments are also used for relief and recovery measures. For women to access the financial instruments, they should have features that address specific gender barriers.

Risk reduction. To reduce disaster risks that women face, loan products for acquiring business and household infrastructure that reduce such risks could include the following key features:

(i) designed for business expansion and/or livelihoods that will enable women to earn additional income and generate surpluses for precautionary savings in times of disaster;

(ii) finance climate adaptable infrastructure and/or equipment as collateral;

(iii) accept personal property as collateral for loan products that reduce disaster risks;

(iv) base loan repayment terms on women’s cash flows and anticipate the occurrence of weather hazards, to minimize default losses;

(v) provide simple documentation requirements; and

(vi) disburse funds rapidly, with an option to release them to women’s e-wallets.

Risk preparedness. Women tend to be more risk averse than men. Hence, to prepare for future disasters, women prefer to use their savings instead of relying on borrowed capital during emergencies. Women are also more inclined than men to use their savings for business expansion or investments. Hence, women prefer savings products and consider that such products are important for strengthening their economic resilience. Women consider precautionary savings, accumulated over time by regularly setting aside small amounts over time, as low-cost sources of liquidity. Research shows that even low-income women can save about 10%–15% of their net monthly income. Key features of savings products appropriate for women include (i) being goal-oriented—i.e., tied to a specific commitment goal and withdrawable only when the goal is met; (ii) accounts that may be opened with small amounts and simple documentation; (iii) accessible digital savings, with cash-in–cash-out modes that are available in channels that are familiar to and near women clients (e.g., convenience stores, rural agents); (iv) include training programs for women savers; and (v) do not impose fees and charges for maintaining account balances.

Risk transfer. Unlike idiosyncratic risks (i.e., risk events limited to an individual and/or household), which may be addressed by precautionary savings, “covariant” or catastrophic risks brought about by natural hazard events such as earthquakes, floods, and typhoons are best addressed through risk transfer or insurance. Insurance may be provided directly or indirectly. Direct insurance is offered directly to individuals through distribution channels such as microfinance institutions and cooperatives. Important features to consider when designing direct insurance products for women are premium affordability, use of distribution channels that are familiar to women, and bundling insurance with other financial products such savings and/or credit. With indirect meso insurance, groups or institutions that directly work with and for women (e.g., microfinance institutions, nongovernment organizations assisting women, and cooperatives with women membership) are the policyholders. These organizations then determine how the insurance claims will be distributed to their members. This type of insurance is a good start to orient women on the important benefits of insurance. Insurance literacy is an important factor to consider when designing insurance products for women

Relief and recovery. Owning an account in a financial institution to which government or donors can transfer cash assistance facilitates the provision of aid during disaster relief operations. Immediately after a disaster, some FSPs reschedule or write off loans of clients that have been affected. The FSPs may also provide new emergency loans at very minimal cost and with a longer and/or relaxed repayment policy. Such loans are most effective immediately after a disaster to address financial shocks arising from the loss of employment or savings.

To assist clients with recovery after a disaster, FSPs may offer loans to restore households’ assets to the pre-disaster condition. Clients may use such loans to repair damaged assets (e.g., houses and business equipment and infrastructure) and purchase new income-generating assets. During disasters, loan repayments stop or slow down. As a result, some FSPs do not have the capital or liquidity required to meet all their clients’ demands for recovery, reconstruction, and rehabilitation. Hence, an emergency liquidity fund for FSPs may be set up to meet their liquidity needs during disasters.

The most suitable option for enhancing women’s economic resilience to disasters appears to be precautionary savings and insurance. While credit may be used to finance risk-reducing infrastructure and recovery efforts, the impact on a woman’s financial well-being should be carefully considered because credit needs to be repaid along with any interest on a loan. Repaying the debt may impact women’s living standards. Repayment difficulties are particularly a concern among low-income women. Thus, savings and insurance are better suited than loans for women, particularly those in the lower-income bracket, because most women are used to setting aside small amounts for emergencies and/or specific future needs. Savings and insurance products should, however, be designed to address specific gender barriers that women face. An important consideration when designing financial instruments for women is to use channels and agents that are familiar and accessible to women. Some women prefer to deal with female agents and/or distributors of financial products and services.

Digital technology along with a well-developed payment system, good physical infrastructure, appropriate regulation, and vigorous consumer protection safeguards can facilitate access to and usage of financial products and services. Using digital technology to provide cost-efficient and tailored financial products and services can help strengthen the resilience of people considered vulnerable and prepare them for hazard events. Digital technologies also enable financial institutions to be resilient in times of disasters. Cloud, solar, and satellite technology can play a crucial role in enhancing the resilience of FSPs especially when disasters result in the loss of connectivity (e.g., electricity blackouts, blocked roads, and Internet outages).

Stakeholders need to work together to facilitate and encourage the development, design, and promotion of relevant and appropriate financial products and services that will enhance women’s resilience to disasters.

  • Policy makers and regulators are urged to (i) adopt gender-specific policies and strategies in national financial inclusion strategies; (ii) establish policies that enable the use of bank accounts and digital financial services for distributing government assistance, particularly during disasters; and (iii) adopt regulations that facilitate women’s access to financial services.

  • Development partners are requested to support the (i) incorporation of a strategic gender approach in country financial inclusion agendas, (ii) establishment of financial mechanisms that will enable FSPs to meet the financing needs that can enhance women’s economic resilience in times of disaster, (iii) conduct of action research on the design of relevant and appropriate financial products for women’s economic resilience to disasters, and (iv) conduct of digital and financial literacy programs appropriate for and tailored to women.

  • FSPs are encouraged to (i) incorporate the collection of sex-disaggregated data as part of FSPs’ regular reporting systems, (ii) provide women access to secure and private savings accounts,

(iii) collaborate with organizations that work directly with women as clients and/or as members,

(iv) adopt innovative digital technologies to provide access to unserved women and employ alternative forms of credit assessment, and (v) include women staff in designing and developing financial products.


Asian Development Bank
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