MUMBAI, India, Sept. 7 (IPS) – Thunderstorms, flash floods and landslides have made headlines this year as rainfall in northern India has been much more intense than forecast. This comes just after what was for many the warmest pre-monsoon season on record. These extreme weather patterns are wreaking havoc on farmers, with smallholders being the hardest hit.
When the temperature in a wheat field rises above 40 degrees Celsius, the seeds begin to break down. During last year’s heat wave, some farmers saw their incomes drop by as much as 50% as thousands of hectares were affected.
As temperatures around the world continue to break records, India is one of the hardest hit countries. Reports indicate that nearly 80% of the country’s 1.4 billion people are vulnerable to climate shocks.
In the context of these rapidly emerging disasters, new tools are needed to help low-income communities respond and build their resilience. Digital tools and services offered by inclusive fintechs play an important role here and will be critical in helping communities adapt.
Heat insurance and emergency loans are essential to help people adapt
In partnership with the Government of India, the country’s financial services industry has a critical role to play in ensuring that low-income people have the knowledge, financial tools and resources they need to survive a crisis and thrive. to adapt to climate change. This will also benefit the economy as a whole as it is estimated that heat stress alone could lead to the loss of 34 million jobs in India by 2030, mostly in agriculture and construction.
Tailor-made financial tools – such as heat-indexed insurance, emergency loans that compensate for lost revenue, and even facilitating relocation to a more livable climate as a last resort – are essential. While microfinance is widely available in India, few financial services are tailored to address the climate crisis.
A groundbreaking exception comes from the Mahila Housing Trust (MHT) in Ahmedabad. Their research revealed the heavy financial losses suffered by low-income urban women during heat waves and determined that the women would be willing to pay up to $2 per month for a heat index insurance program with predetermined payouts designed to to cover several days of lost income. .
The pilot program has already provided insight into the necessary preconditions for such a product, including a clearly defined index and data sources, and a strong local distribution channel. Its lessons can guide the development of similar financial solutions for other low-income groups and climate events, such as floods.
As climate change accelerates, not everyone can adapt where they are, and more and more people are being displaced. Digital records of assets, income and credit history can be critical to ensuring displaced people can start new businesses and relocate with climate-sensitive financial instruments, such as emergency loans, microloans and bundled products.
Digital delivery expands the possibilities for end users
Rosina Das, who runs a small grocery store in Odisha, is one of thousands of Annapurna customers benefiting from an emergency loan during the COVID-19 pandemic. Accion partnered with Annapurna to develop the emergency digital loan product as part of a broader program with the Mastercard Center for Inclusive Growth to connect small businesses to the digital economy.
These kinds of emergency loans can help small farmers and micro-enterprises survive in the face of climate crises and supply chain disruption. Rapid capital injections allow businesses to stay open and continue to benefit the local community during the unpredictability of the monsoon season.
And bundled insurance and loan products like those offered by agricultural insurance company Pula are offering small farmers across Africa protections they never had, as well as incentives to switch to resilient seeds and other measures to protect against climate-related losses in years to come.
Finally, continuing to expand access to digital financial platforms is critical to building an inclusive financial system and resilience in the context of climate change. Governments and fintech companies can use these platforms and data analytics to identify communities most vulnerable to extreme heat and use this information to target relief efforts, including financial solutions. Residents can access the information on their mobile phone and smartphone, and for providers the cost of serving and acquiring their customers is much lower through digital channels.
It is fair to say that financial solutions are only part of the larger changes that low-income communities need to adapt to climate change.
In the long term, India and all countries must develop a financially inclusive green economy. This requires a comprehensive approach that includes increased investment in renewable energy, the development of climate-resilient infrastructure and the large-scale promotion of sustainable agriculture, aided by digital tools and financial solutions that empower farmers to increase productivity while playing a vital role. play in the sustainable management of rural environments.
Policy makers and financial technology developers in India must act quickly to address both short and long term solutions. Policymakers’ support could boost green finance initiatives, including by subsidizing climate-sensitive financial products for the poor.
Financial technology developers must work with local communities and organizations to design and implement innovative solutions that meet the specific needs of low-income individuals in different situations and with different climate threats.
Unless we find a way for rural farmers and low-income workers to survive today’s climate extremes, there will be no sustainable, prosperous future. And for this, digital financial services designed for the most affected communities are an indispensable solution.
Debdoot Banerjee is Director of Digital Strategy and Transformation in Accion’s Global Advisory Solutions team, based in India.
© Inter Press Service (2023) — All rights reservedOriginal source: Inter Press Service
