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

01.09.2015
There is growing interest in the role microfinance could play in facilitating adaptation to climate change. This article reviews the literature linking microfinance and climate change adaptation, which falls into two key areas. The first area focuses on the potential for microfinance to facilitate household adaptation, which has been only partially successful in linking microfinance and adaptation because of weak conceptualization of adaptation and terminological shortcomings. The second area examines the vulnerability of microfinance institutions to climate change, highlighting that they are directly vulnerable to climate change themselves and are indirectly vulnerable through their beneficiaries. The realization of climate-resilient microfinance requires both climate proofing internal operations to reduce direct vulnerability, and promoting climate resilience among 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.