Can resilience be built through micro-finance tools?

Abstract

This study focuses on the livelihoods of rural households in the region of Piura in northern Peru, who are either farmers or livestock holders. The livelihood systems of these farmers are exposed to and vulnerable to climate-related shocks like floods and droughts and the El Niño phenomenon. A particular emphasis is put on the analysis of the livelihoods and strategies of these households in order to examine the range of assets, their relations and interdependencies as well as the prevailing social, institutional, political, and environmental structures that are influencing the livelihoods. In addition, the coping and adaptation strategies of the farmers are investigated with a focus on the actions and available measures that the farmers take in anticipation of or during a natural phenomenon, and also to understand how they will act and adapt to these events in the future. Hence their understanding of climate change and possible measures of how to cope with it are assessed and recommendations concerning long-term adaptation strategies with regard to climatic events are made.<br /> The second part of the research investigates what kind of protection local farmers need, which kind of financial services schemes are demanded and appropriate for the region, and determines the perception and understanding of insurance in order to design marketing strategies and programs to educate and inform the clients. This analysis also determines the ability of the market to support these micro-insurance and other financial services. It is very important to know the specific conditions of the area, with regard to institutions and actors involved in order to design appropriate financial instruments.<br /> A particular emphasis is put on determining in which way micro-insurance or other financial services can play a role in fostering the resilience of these communities. It is particularly important to evaluate what conditions are necessary to make these mechanisms sustainable and accessible to local farmers. Investigating the possibilities for offering micro-finance services to agriculture in the area, e.g., especially bundled schemes such as micro-insurance coupled with micro-credit, are of particular interest. Moreover, the possibilities for climate-risk management insurance instruments, like area-based climate indexes, bundled schemes and others are evaluated.