Microfinance and climate change adaptation: an overview of the current literature

There is growing interest in the role microfinance could play in facilitating adaptation to climate change. This article contributes to this interest by reviewing the state of the literature on microfinance and climate change adaptation which has two key areas. The first area of the literature focuses on the potential for microfinance to facilitate household adaptation, which has been only partially successful in linking microfinance and adaptation because of weak conceptualisation of adaptation and terminological shortcomings. The second area of literature examines the vulnerability of microfinance institutions to climate change, highlighting they are directly vulnerable to climate change themselves as well as indirectly vulnerable through their beneficiaries. The realisation of climate-resilient microfinance requires both climate proofing internal operations to reduce direct vulnerability, and promoting climate-resilience amongst beneficiaries. This may have already happened serendipitously to an extent, but there is scope for further action. We conclude that more evidence is needed to substantiate the links and thus progress the literature, particularly studies employing an adaptation lens.