May 28, 2018

Financial Inclusion– A Key Tool for Weathering Economic Shocks

By Giulio Areinamo, Senior Investment Officer, MicroVest | May 28, 2018 | Featured in NDCI

One of the key points of the monumental Paris Agreement on climate is “the importance of averting, minimizing and addressing loss and damage associated with the adverse effects of climate change.” One such adverse effect is the multiple natural disasters that have plagued the world in the past few years, and one way the issue is being addressed is through financial inclusion.

The impact of these natural disasters is far-reaching, and disproportionately affects poorer countries. After humanitarian needs are met, a person’s ability to effectively rebuild their life is highly dependent on their financial situation. Insurance plays an important role in helping people manage these risks, but there is still significant work that needs to be done to expand access to low-income communities. This is especially true in emerging markets where access to affordable insurance is often a luxury.

Financial resiliency at a community level is needed for low-income communities to better withstand the economic shocks of natural disasters. To do this, financial inclusion—that is, expanding access to financial services—is critical. People who have an array of financial products, including savings, insurance, and access to a credit line, can more quickly rebuild when a disaster hits.

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