Aid for Climate Refugees in Developing Countries: Microfinance?

Climate change is objectively one of the major problems humanity faces and will continue to combat for the foreseeable future. This is partly because the effects of climate change contribute to a multifaceted, manifold challenge not just experienced by the environment. For instance, poverty reduction and worldwide development are complicated, as individuals and groups must adapt. In developing countries, the severity of this adaptation is heightened, resulting in the people experiencing a higher vulnerability, or inability to cope with disruptive changes. Furthermore, climate refugees in developing countries, or people who are forced to leave their home region as a result of the effects of climate change, are placed in even higher vulnerability, given their minimized resources. Microfinancing offers a potential solution by providing tailored financial services like credit, savings, and insurance, empowering vulnerable populations to build resilience. However, challenges exist. Especially with climate refugees in developing countries, there is a higher likelihood of a lack of understanding of the lending process amongst borrowers and it is more difficult for borrowers to increase their incomes for repayment, given their lack of resources. An adapted banking model, intermediated microfinance, could mitigate these challenges by ensuring benefits for climate refugees and lending institutions. Through the presence of case studies, this paper will examine how intermediated finance and its connection with microfinance can promote growth and economic resilience amongst climate refugees despite “insurmountable” barriers.