Fenton, A, Paavola, J orcid.org/0000-0001-5720-466X and Tallontire, A (2017) The role of microfinance in household livelihood adaptation in the Satkhira District, Southwest Bangladesh. World Development, 92. pp. 192-202. ISSN 0305-750X
Abstract
There is increasing interest in the potential of microfinance to foster climate change adaptation. However, existing literature over-relies upon theoretical arguments rather than empirical evidence, and until now the emphasis has been on potential positive linkages. We address these weaknesses by empirically examining the role of microfinance in adaptation, drawing from household-level quantitative and qualitative data gathered from Satkhira District, Southwest Bangladesh. We find evidence that microfinance facilitates coping by reducing sensitivity to environmental and climate hazards. Credit is especially important because its availability is uncorrelated with the occurrence of flooding, unlike many other traditional coping responses. We also find evidence that microfinance facilitates adaptation by helping households to overcome financial barriers of adopting adaptation options which reduce exposure or sensitivity. However, credit limits restrict its role to incremental adaptations, which may not meaningfully reduce vulnerability. Transformational adaptations require access to bank credit. Therefore the poorest cannot effectively adapt and are penalised financially by having to obtain loans to cope. We also find evidence that microfinance can lead to maladaptation when used in non-profit generating activities as income streams are not produced to help repay associated costs. Almost a fifth of all loans were obtained for repaying existing loans. Thus microfinance may undermine longer term adaptive capacity.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2016 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY license (http://creativecommons.org/licenses/ by/4.0/). |
Keywords: | Bangladesh; Climate change; adaptation; microfinance; microcredit |
Dates: |
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Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Environment (Leeds) > School of Earth and Environment (Leeds) > Sustainability Research Institute (SRI) (Leeds) |
Funding Information: | Funder Grant number ESRC RES-599-28-0001 |
Depositing User: | Symplectic Publications |
Date Deposited: | 05 Dec 2016 12:40 |
Last Modified: | 23 Jun 2023 22:18 |
Published Version: | https://doi.org/10.1016/j.worlddev.2016.12.004 |
Status: | Published |
Publisher: | Elsevier |
Identification Number: | 10.1016/j.worlddev.2016.12.004 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:108963 |