Category Archives: Microfinance

Climate change is “biggest global risk”, but our humanitarian response is “too important to fail”: two major new reports

By Catherine Blampied, Policy Advocacy Officer

Every year, as thousands of business and political leaders prepare to descend on the mountain resort of Davos in Switzerland to attempt to solve some of the world’s biggest problems, the World Economic Forum publishes its Global Risks Report. The annual report highlights the most significant threats to the world’s economy and society, and how they could evolve and interact with each other over the next decade. In the 2016 Report, almost 750 experts assessed 29 separate risks in terms of both their impact and likelihood.

These experts deemed failure to tackle climate change through mitigation and adaptation as the single biggest risk in terms of its potential impact over the next decade. This is the first time since the report was published 10 years ago that an environmental risk has topped the ranking.

WEF risks chat

 

One of the reasons for this huge potential impact is the multiple and profound interlinkages between climate change and other risks, such as water crises, food insecurity, the spread of infectious diseases, mass forced migration, unemployment, and even fundamental economic, social and political instability.

WEF risks interconnectedness

Commenting on the Global Risks Report, Cecilia Reyes, Chief Risk Officer of Zurich Insurance Group, said: “Climate change is exacerbating more risks than ever before in terms of water crises, food shortages, constrained economic growth, weaker societal cohesion and increased security risks. Meanwhile… political conflicts are in turn making the challenge of climate change all the more insurmountable – reducing the potential for political co-operation, as well as diverting resource, innovation and time away from climate change resilience and prevention.”

It’s little wonder that insurance companies are taking a keen interest in combatting the growing threat of climate change. As highlighted by the Governor of the Bank of England, Mark Carney, the insurance industry is heavily exposed to climate risks, facing an estimated £33 billion per year in extreme weather-related losses. He warned that climate change will lead to financial crises and falling living standards unless the world’s leading countries take much more action. In the run-up to the Paris Climate Summit, voices from the insurance industry were among those calling for the need for a strong agreement in Paris to limit global temperature rise to well below 2 degrees.

At the same time, insurance can provide one key solution for building communities build their resilience to climate shocks, including amongst the poorest people across the developing world – a point made in a second major report launched this week, Too Important to Fail by the UN High Level Panel on Humanitarian Financing.

Ethiopia drought 2011 UNICEF

Drought in Ethiopia; Photo: UNICEF

In 2014, 53,000 people per day were forced from their homes by natural disasters, 90% of which were due to weather-related events. The world today spends around $25 billion per year on humanitarian assistance, including to help people affected by natural disasters and extreme weather. This amount is an astounding 12 times higher than it was in 2000, and yet never before has there been such a large remaining unmet need, estimated at $15 billion. According to UN Secretary General Ban Ki-moon, we are living in an age of “mega crises”.

And so the High Level Panel’s report could not be clearer: the current global humanitarian system is “over-stretched and unable to respond adequately”. By 2030, climate change, among other factors, is predicted to continue to drive up the costs of humanitarian response to well over $50 billion a year.

We do not only need more money in the humanitarian system to plug that gap, we need to change how we do things – moving from reactive response to preemptive preparedness and resilience-building; integrating our humanitarian and sustainable development interventions more coherently; and bringing in new actors – including the private sector – through new financing models and innovative partnerships. Initiatives like the G7’s ‘InsuResilience’, which promote the use of climate risk insurance to protect vulnerable people, could help tick all three boxes.

Philippines Typhoon Haiyan 2013 European Commission

Destruction caused by Typhoon Haiyan in the Philippines; Photo: European Commission

As highlighted in the High Level Panel’s report, “The insurance industry is waking up to the opportunities for bringing its risk financing products to least developed countries. Demand is growing rapidly…” The report argues that in the event of natural disasters, sovereign risk financing can help governments develop financial resilience, agricultural insurance can help to protect the livelihoods of farmers and pastoralists, and social protection programmes should be adaptable. It points out that, if they are well-designed, insurance programmes can act as an incentive of risk awareness, prevention and mitigation, as well as just risk transfer. Drawing attention to regional initiatives such as the African Risk Capacity and the Caribbean Catastrophe Risk Insurance Facility, the report recommends that risk financing mechanisms such as insurance be replicated across disaster-prone countries, to avoid relying so heavily on relief efforts that only kick in well after disasters happen.

Taken together, these two reports tell a compelling story: climate change is the biggest risk to the world today and we need to get smarter about building resilience to extreme weather and natural disasters. Climate-related insurance and other innovative types of risk financing are far from a silver bullet but they can offer one important tool for the global humanitarian community as it comes to terms with this challenge.

January conference call recording is now available!

In 2016, we will be campaigning on three important issues on which grassroots advocacy can have real impact, and which will potentially affect the lives of millions of people: TB; nutrition; and climate risk insurance. On this month’s conference call, we introduced these new campaigns to campaigners to help you plan your activities for the year. We also set you the challenge of bringing new people in to join and strengthen our movement. With more of us reaching more decision-makers, we can have even more impact!
Take a listen to the recording below and find out more:
If you have any questions about any of the campaigns discussed, or about joining a grassroots group near you, please let Emily know on emily.cabon@results.org.uk.

 

Did the Paris Climate Summit Deliver on Climate Risk Insurance? #COP21 Part 3 – Guest Blog

Guest blog by Dr Koko Warner, Laura Schäfer and Michael Zissener of the Munich Climate Insurance InitiativeThis is part 3 of a three-part blog series that we’ll publish before, during and after the Paris climate conference COP21: check out part 1 and part 2.

Last month in Paris, after years of intense negotiations and amid jubilant celebrations, we witnessed 195 governments successfully create a historic international agreement Paris-Agreement-Adoptedto tackle climate change. While the Paris Agreement is not perfect, and everyone is clear that the real work will lie in actually implementing the agreement and continually increasing its level of ambition, it marks an undeniable turning point in the world’s response to the growing threat of climate change. As well as the overall success of the agreement, COP21 saw a significant, tangible milestone in delivering on climate risk insurance specifically.

This marks a defining moment for us at the Munich Climate Insurance Initiative (MCII). MCII is a partnership between some of the world’s largest insurers, academic think-tanks, NGOs and adaptation and insurance practitioners. Among other projects, we provide technical and advisory input to the G7 Initiative on Climate Risk Insurance (which you can read more about in parts 1 and 2 of the blog series, and see more below). For 10 years we have been working to advance insurance solutions for the world’s most vulnerable communities, and over the years we have participated in numerous COP climate summits, pushing for a strong outcome and making the case for climate risk insurance for poor and vulnerable people.

2015 signalled progress on climate risk insurance in three key parts of the Paris Package:

1. The “PWFP FoodSecurearis Agreement” itself, the core legally-binding part of the deal, for the first time introduced Loss and Damage as a ‘third pillar’ of international climate policy through a standalone article, alongside mitigation (preventing further dangerous climate change) and adaptation (adjusting to climate impacts). This sends a signal that vulnerable countries will not be left alone with the consequences of climate change. This is a significant milestone because in the lead-up to Paris, it was contested whether there would be a separate recognition of Loss and Damage.

Importantly, this article secures the future of the Warsaw International Mechanism on Loss and Damage (whose current workplan runs out in 2016), and mandates governments to expand and strengthen it. It also specifically names “comprehensive risk assessment and management” and “risk insurance facilities, climate risk pooling and other insurance solutions” as two key areas in which governments should enhance their understanding and action.

2. The “Decision” – the non-legally binding part of the text, which sets out the action plan of the UNFCCC and governments, outlined the roadmap for work in coming years on comprehensive climate risk management and recognised insurance as an essential tool to address loss and damage. It requested the Executive Committee of the Warsaw International Mechanism on Loss and Damage to “establish a clearinghouse for risk transfer that serves as a repository for information on insurance and risk transfer, in order to facilitate the efforts of Parties to develop and implement comprehensive risk management strategies”.

3. The G7 and partners presented a “Rapid Action Package” for the G7 Initiative on Climate Risk Insurance, as part of the “Lima Paris Action Agenda”. Together they committed to provide $420 million (around £285 million) towards the aim of boosting climate risk insurance coverage by 400 million vulnerable people by 2020. The Rapid Action Package presented at COP21 aims to cover the first 180 million people by 2016 towards the ultimate 2020 target, through increased support for several existing platforms, such as the African Risk Capacity, the Caribbean Catastrophe Risk Insurance Facility, the Pacific Catastrophe Risk Assessment and Financing Initiative, and the German government’s climate insurance fund.

So what’s our verdict? The Paris outcome demonstrates a shift to a new paradigm in the way governments approach climate risk management. Through the three critical components outlined above – the “Agreement”, the “Decision”, and the G7 Initiative on Climate Risk Insurance – the stage is set for the next five years as we move towards implementing innovative insurance solutions for poor and vulnerable people in ways that increase resilience.

Australian DFAT photo

Photo: Australian Department of Foreign Affairs and Trade

These solutions will only be successful if they tackle two difficult challenges: (1) they must benefit the poor, vulnerable and hard-to-reach groups who currently have negligible access to insurance coverage, and (2) they must re-think approaches, utilise new technologies and find ways to make insurance schemes affordable, including through premium support, but also sustainable for the long term. The yardstick of success between 2016 and 2020 – when the Paris Agreement comes into legal force – will be the development of credible plans for implementing risk management strategies and schemes that include insurance for vulnerable countries and people, and robust national plans that assess and map climate risks and incentivise risk reduction and transfer.

So as we applaud the successful Paris outcome, what we’re really looking forward to is the hard work of bringing it to life.

How climate risk insurance can help protect the poor, #COP21 part 2

By Catherine Blampied. This is part 2 of a three-part blog series that we’ll publish before, during and after the Paris climate conference COP21: check out part 1 and look out for part 3 coming soon.

After a reported record-breaking 785,000 people across 175 countries took part in the Global Climate March (see some amazing pictures here), 150 world leaders opened the Paris climate summit on Monday with 150 well-intentioned speeches. Then the “brutal negotiations” began in earnest. We are not yet halfway through the conference and there is still an enormous amount of tough work to be done by negotiators to hammer out a deal that all countries are prepared sign up to. Nevertheless, there remains real hope of the first legally-binding and universal climate agreement being struck by next Friday’s deadline.

Along the way, we have already heard some big announcements. The UK, for example, has joined Mission Innovation – a flagship initiative to accelerate investment in clean energy for all – and promised £100 million in 2020 for projects that will help address the energy needs of developing countries and promote low-carbon development. It also pledged a contribution of £30 million in 2016 to the ‘Least Developed Countries Fund’, an international funding mechanism that assists the world’s poorest countries to better adapt to the impacts of climate change. And several governments, although not including the UK – Australia, Canada, France, Germany, Luxembourg and The Netherlands – have agreed to equip 80 developing countries with better climate risk early warning systems.

What’s the news on climate risk insurance? So far, there have been several interesting announcements by the UK Government (including £15 million of funding towards the Pacific regional disaster insurance scheme) and the US Government (pledging $30 million, or £20 million, towards the African, Caribbean and Pacific climate risk insurance schemes), as well as the launch of the United Nations “Anticipate, Absorb, Reshape” (A2R) initiative to protect communities from cyclones, droughts and flooding, including through improved insurance coverage across 30 countries. Businesses are also stepping up, with the global insurance group Lloyd’s committing $400 million (£266 million) of capital towards natural catastrophe insurance in developing countries and inviting development agencies like the UK’s Department for International Development (DFID) to work together.

But the biggest news – we hope – will come at tomorrow’s event at COP21 hosted by the German government, where Secretary of State for International Development Justine Greening has the opportunity to unveil an ambitious financial commitment and action plan for the UK’s contribution towards the new G7 Climate Risk Insurance Initiative.

This initiative, “InsuResilience”, was launched earlier this year and aims to bring climate risk insurance to 400 million people by 2020. So far, only the German government has actually committed funding towards it (of €150 million, or around £110 million).

Tomorrow is a golden opportunity for the UK to really step up its existing work on climate risk insurance. The Government should ensure that the poorest and most vulnerable people, including women and girls, truly benefit from these efforts. In particular, we want to see the UK prioritise the needs of smallholder farmers by significantly increasing its funding for weather-indexed microinsurance programmes. As we saw in last week’s blog, it’s the world’s 2 billion small farmers – many of whom are women – who are among those most vulnerable to the growing impacts of climate change.

The great news is that, through numerous pilots and relatively small-scale weather-indexed microinsurance schemes that already exist, we have now have an increasing amount of evidence about what works well and how donor funding can tackle the biggest remaining problems. For example:

  • We know that the UK should provide financial support for struggling smallholder farmers who would otherwise be unable to pay the full premiums to enable them to benefit from these schemes.
  • We know that donors will need to work very closely with a range of partners, including domestic governments, farmers’ groups, NGOs and other networks who are trusted by remote and vulnerable rural communities, as well as organisations already providing farmers with small loans (such as microfinance institutions and banks) and inputs like seeds and fertiliser. Some of the most promising avenues for reaching millions of small farmers are through bundling insurance together with loans and inputs.
  • And lastly we know that they will need to recognise climate risk insurance not as a silver bullet, but as one useful tool in a bigger toolkit. Insurance should be part of a holistic approach, as highlighted in the successful R4 Rural Resilience Initiative in Ethiopia and Senegal run by Oxfam America and the World Food Programme, where microinsurance is one of a combined package of four activities. Another promising avenue is integrating climate insurance into governments’ national social protection schemes, as currently happening in Ethiopia, through the Productive Safety Net programme, and in Kenya, through the Hunger Safety Net programme.

The time is right to extend the reach of weather-indexed microinsurance from tens of thousands of farmers here and there to millions worldwide. RESULTS will be watching for an ambitious commitment by the UK at COP21 tomorrow to play its part in achieving this.

Check back in part 3 of our blog series after #COP21 finishes next week to find out what happened!

 

“Just one natural disaster away from losing everything”: how climate risk insurance can help protect the poor, #COP21 part 1

By Catherine Blampied. This is part 1 of a three-part blog series that we’ll publish before, during and after the Paris climate conference COP21: look out for parts 2 and 3 coming soon.

RESULTS campaigners do what they do because they share a fundamental belief: people in the developing world are enabled to lift themselves out of poverty if they can access good healthcare, good education, and good economic opportunities. We see these as the three basic building blocks that empower people to flourish through their own hard work.

At the same time, the huge and growing threat of climate change puts all these efforts into jeopardy. Extreme weather events such as droughts and typhoons are becoming more common and more severe in their impacts. Climate shocks like these take a disproportionate toll on people living in poverty and vulnerability, the majority of whom – an estimated 2 billion around the world – get their livelihoods from smallholder farming. As a recent World Bank report said: “The poor live in uncertainty, just one natural disaster away from losing everything they have.” Escaping poverty is not a one-way street: as many as 100 million people are predicted to fall back into extreme poverty by 2030 without a major effort to tackle the impacts of climate change.

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Recording Available: Global Webinar with Dr Jeffrey Sachs live from New York

Yesterday, two days after the new goals have been formally adopted, we teamed up with our RESULTS international partner’s for a special webinar with Dr Jeffrey Sachs, live from the United Nations General Assembly in New York.

As many of you will know, Dr Sachs has an extensive career working on global issues, is a leading thinker on the future of our planet and his worked as a special advisor to the UN, amongst many other incredible achievements. He joined our webinar live from the excitement of the United Nations General Assembly to share his thoughts and aspirations for the new global goals as well as answering many of your brilliant questions.

If you missed it, the recording of our webinar is now live. Just follow this link:

https://www.fuzemeeting.com/replay_meeting/f2988286/7624858

Just remember, we can be the first generation to end extreme poverty, the most determined generation in history to end injustice and inequality, and the last generation to be threatened by climate change. Visit www.globalgoals.org now and share the goal that resonates most with you and don’t forget to use the hashtag #TellEveryone

The Global Goals: Your Task is to Tell 7 Billion People, in Just 7 Days.

Yesterday, Friday 25th September, 193 world leaders met in New York to commit to the new Sustainable Development Goals (SDGs). Also known as the Global Goals, the SDGs are a set of ambitious and universal targets that define the development priorities for the next fifteen years. The aim of the Global Goals is to end extreme poverty, fight inequality and tackle climate change by 2030.

However, the goals will only be met if world leaders are held accountable for delivering on their promises – and the best chance of that is if everyone on the planet knows about the goals. That’s why Richard Curtis, leading screenwriter, producer and film director, founded Project Everyone. The simple but mighty ambition of Project Everyone is to share the Global Goals with 7 billion people in 7 days, following their announcement at United Nations Summit. Today is day 1 of 7.

The next few days have lots in store; the goals will be plastered all over every website, TV station, cinema, school, radio station, newspaper, magazine, billboard, newsletter, noticeboard, pinboard, milk carton and mobile phone. From Radio Everyone, the worlds largest Lesson, global cinema advertisements and world’s leading brands, by the end of the week (almost) everyone should have heard about the new Global Goals!

However, as brilliant as a team Richards Curtis and Project Everyone are, they cannot make the goals famous without your help. So I urge you now to head to the Global Goals website and share the goal that resonates most with you. Don’t forget to use the #TellEveryone and tag @TheGlobalGoals!

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If you have any further questions on Project Everyone or The Global Goals, do not hesitate to contact Emily on emily.cabon@results.org.uk.

The Grameen Bank under threat in Bangladesh

Many discussions about microfinance begin with the same story. It’s the story of a Bangladeshi economics lecturer who had a novel but compelling idea, and how the organisation he created, the Grameen Bank, became one of the world’s foremost socially-oriented financial institutions. As you read this a new chapter is being written in this story, where the Bangladeshi government looks at loopholes in the Grameen’s founding statutes as a way to seize control of its finances. In doing so the government is threatening the rights of the Bank’s millions of member-shareholders, and putting the futures of both the Grameen Bank and those it serves at risk.

Grameen BankSo what happened? The Grameen Bank was granted institutional status in 1983 by the enactment of a special law: the Grameen Bank Ordinance. The Ordinance enabled the creation of a legal entity that would “provide credit… to landless persons for all types of economic activities”, and outlined the relationship that the Bank would have with government and its clients.

 

Three decades have passed since then, and the Grameen Bank has made loans totalling more than $9bn to millions of poor people. These clients are mostly women, over 5.5 million of whom own shares in the Bank purchased with funds from their Grameen savings accounts. Since 1987 these borrower-shareholders have also sent representatives to occupy nine out of twelve seats on Grameen’s Board of Directors, and this representation gives the poor shareholders significant input into the strategic direction of the Bank. The system was designed to ensure that the Bank retained its original focus on alleviating poverty, as well as its commitment to addressing the needs of its clients.

Grameen’s methodology has been emulated all over the world, but at home in Bangladesh the Bank has recently been under threat following a public clash with the governing Awami League party. Almost two years have passed since the government forced the resignation of the Bank’s founder, Prof Muhammad Yunus, amidst public protests from Grameen employees and clients. And a Commission of government appointees is currently investigating the legal status of the Bank, as well as the rights of shareholders and other issues. The Commission is simply the latest development in the fraught relationship between Grameen and the Awami League government, but the tone of its preliminary findings is particularly troubling.

In an interim report published recently, the Commission raised a number of disquieting points about the legal status of the Bank and its shareholders. The document supports the government’s position that Grameen is ultimately an organ of the state under the terms of the Ordinance, citing as evidence the fact that the Ordinance does not explicitly give ownership of the Bank to its shareholders. Indeed, the Commission notes that the statute does not properly define the rights of the people it describes as ‘member-borrowers’ or ‘shareholders’ at all.

But their role hasn’t been defined for close the thirty years; yet successive governments, central bank governors, finance ministers and government-appointed Grameen Board Chairmen have been satisfied with the de facto ownership exercised by the shareholders. The Commission actually specifically notes in their report that “No clarification about the usage of these terms seems to have been sought by anyone”, presumably because all parties were satisfied with the status quo where the Bank maintained its operational independence and the shareholders dominated the board. Here, members’ status embodies the spirit in which Grameen was created.

The Grameen Bank functions best as an institution that serves the needs of its clients, but at the moment the Awami League government is trying to make it an institution that is run by the State. And that is worrying.

Past experiences in Bangladesh and elsewhere indicate that governments are not always good at operating development finance institutions. For example, previous experiments in state-run microfinance have sadly been used as a conduit for patronage, vote-buying, and associated corruption. In many cases these institutions eventually collapse under the weight of their own mismanagement, leaving a legacy of wasted resources and institutionalised corruption.

If this were to happen to the Grameen Bank it would be a travesty. After three decades of demonstrating the potential for inclusive financial services to change the lives of disadvantaged people for the better, the Bank must be allowed to retain its independence. If the de facto status of the members on the Board of Directors is not properly defined in the Ordinance, then the law should be altered to normalise the situation. Any discrepancies cannot and should not be used as an excuse for the government to deprive Grameen’s members of the rights they have exercised for more than thirty years, and everyone who cares about the work of the Grameen Bank has a responsibility to stop that from happening.

Annual Review of Global Microfinance Launched in Washington DC

Since 1998, RESULTS’ partner organisation the Microcredit Summit Campaign have published an annual review of microfinance across the globe. This week saw the launch of the 2013 edition using data from 2011, which found that for the first time since the inception of the  Campaign the number of people making use of microfinance services has actually become smaller from year to year.

This reduction in numbers was largely the result of a contraction in the Indian microfinance sector following the Andhra Pradesh crisis of 2010, but the report also paints a complex picture of the different forces influencing the progress of financial inclusion around the world.

In many parts of the world, changing donor/investor attitudes and other factors reduced the funding that was available to microfinance institutions; a situation that was compounded by the global financial crisis. The increasingly commercial and profit-oriented nature of some microcredit institutions has also created other issues as institutions lose their incentive to seek out poorer and more remote (and thus less profitable) clients and communities.

The report also contains interesting insights and expert interviews on the benefits of group lending programmes for fostering social solidarity, an exploration of the potential benefits of mobile banking for expanding microfinance outreach and a psychological study of American university students that goes some way to explaining why vulnerable people in developing countries are so susceptible to overindebtedness.

The complete report is available here.

“Banking on Change” Partnership Renewed in Parliament

In 2009, a unique partnership was formed between two of the world’s largest NGOs, CARE and Plan, and Barclays, one of the UK’s oldest and biggest financial institutions. The collaboration sought to leverage the strengths of each partner so that collectively they could expand access to appropriate financial services amongst the millions of people across the developing world who remain ‘unbanked’.  Last week at a special event in the House of Lords hosted by Lord Boateng, Co-Chair of the APPG on Microfinance, the three partners renewed their commitment to the collaboration for a further three years and called on the Prime Minister and other global leaders to consider the benefits of financial inclusion as they meet in Liberia to discuss the post-2015 development agenda.

Lord Boateng speaks at the launch of the Banking on Change report

The Banking on Change programme involves the promotion of Village Savings and Loan Associations; locally-organised groups that meet regularly to deposit small savings in a locked box. Periodically, members qualify to receive loans from the cash in the box, which they can use to invest in small businesses or to pay for occasional expenses such as school fees or funeral costs. Successful groups are offered the chance to open formal group savings accounts at local Barclays branches, which for many of the disadvantaged group members will constitute the first time they have ever entered the premises of a mainstream bank.

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