MICROFINANCE PAPER WRAP UP: “Building Resilience Through Financial Inclusion: A Review of Existing Evidence and Knowledge Gaps,” published by Innovations for Poverty Action (IPA)

This is a summary of a paper by Danielle Moore, Zahra Niazi, Rebecca Rouse and Berber Kramer; published by Innovations for Poverty Action (IPA); January 2019; 16 pages; available at
https://www.poverty-action.org/sites/default/files/publications/Building-Resilience-Through-Financial-Inclusion-January-2019.pdf

Lower household incomes are linked with lower levels of resilience from financial setbacks. The authors suggest that access to savings and other forms of financial inclusion can address this lack of economic resilience. While low-income households typically make investments with minimal returns, the authors argue that financial services, such as insurance and savings accounts, can contribute to: “I. Increasing investment in the face of risk; II. Strategies for risk reduction; III. Facilitating risk preparedness; and IV. Responding when a shock hits.”

To be most advantageous, the financial services must be customized, such as for the needs of smallholder farmers or by using digital payments to reduce transaction costs. One example is an insurance product sold with agricultural inputs – such as seeds and fertilizer – that protected farmers in Ghana in case the market price for the crops fell.

By Tiannah Steele, Research Associate

Sources and Additional Resources

IPA publication
https://www.poverty-action.org/sites/default/files/publications/Building-Resilience-Through-Financial-Inclusion-January-2019.pdf

IPA homepage
https://www.poverty-action.org/

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