African girl planting mango tree /iStock

When nature is part of financial inclusion

By Majidah Hashim, Communications, AFI

Every time a baby girl is born in the village of Piplantri, the villagers celebrate by coming together and planting 111 trees in her name. Since the initiative started in 2006, the village, located in the Rajsamand district of Rajasthan, India, which was once arid and dry, has transformed into a lush green oasis with almost half a million trees planted to date.

The tiny village, with a population of roughly 6,000 people, was once plagued by deforestation, destructive marble-mining and severe water shortages which stunted economic growth for the entire community. At the same time, the village also experienced female infanticide, foeticide, child marriage, gender discrimination and the stereotype of girls as financial burdens.

This changed when Shyam Sundar Paliwal, who lost his daughter to dehydration, became village head. In memory of his daughter, he created an investment model that would ensure financial inclusion for all girls by making them custodians of the village’s most precious resource: trees.

The investment model is simple. Whenever a baby girl is born, the villagers would plant 111 trees for her and make her family caretakers of these trees. As a fee, they would raise INR21,000 (approximately USD278) and the family would put aside INR10,000 (approximately USD132). This sum total of INR31,000 (approximately USD410) is put into a fixed deposit for the girl until she reaches the age of 18, where she can then withdraw the fund to finance her higher education or marriage.

The fixed deposit came with several terms and conditions; The family cannot abort or kill a girl child, they must guarantee that she receives an education, and they are not allowed to marry her before she is of legal age. The family also pledges to nurture the survival of the trees with dignity and respect as they do with the girls.

As a result, the village now regards girls as blessings and thrives on a variety of eco-friendly industries, many of which are women-led. The initiative has increased employment opportunities, reduced crime rates, and brought financial stability to the community.

The people of Piplantri are not the only ones who saw investment in nature and financial inclusion as mutually beneficial. It also makes sense at the policy level.

Climate change is chiselling away at not only the livelihood of vulnerable communities, but also their ability to access financial products and services. Increased unpredictability of yield has also increased the liabilities of smallholder farmers around the world. For this reason, central banks and financial regulators have stepped in to ensure provision of much-needed assurances when times are good, and safety nets when times are bad.

Armenia, for example, has long been plagued with droughts and parts of the country is already experiencing desertification in combination with hale and frost, which threatens its agriculture sector. When smallholder farmers face financial losses, so do banks when they default on loans. To address this problem, the Central Bank of Armenia established a public-private partnership called the Agricultural Insurer’ National Agency (AINA). The program subsidizes insurance premiums which widens access to farmers and giving confidence to lenders.

Morocco’s cereal crops are exposed to a variety of climate sensitive risks including drought, excess moisture, hail, frost, wind and sandstorms. This prompted the country to design “climate multi-risk” insurance products. Through its membership in the Sustainable Insurance Forum, Morocco’s Supervisory Authority of Insurance and Social Welfare (ACAPS) has worked hard to expand the assets accepted as cover for technical provisions and encourage the country’s insurance sector to subscribe to sustainability standards.

In some countries, central banks have offered credit guarantees where exposure to more severe impacts of climate change encroach into priority high-risk sectors. For example, under the Nigeria Incentive-Based Risk Sharing System for Agriculture Lending (NIRSAL), the Central Bank of Nigeria guarantees 50 percent of losses if a smallholder farmer cannot repay a loan. NIRSAL also includes a USD300 million risk-sharing facility where 30 to 75 percent of a commercial bank’s risk on agriculture loans can be shared with the central bank.

In 2014, Pakistan embarked on a One Billion Tree Tsunami as a direct response to global warming. Incredibly, this target was achieved in 2017.

The following year, Pakistan announced a Ten Billion Tree Tsunami project which was put under the mandate of its Federal Minister of Climate Change. The national project not only gave free saplings for school projects, it has also created over half a million new jobs. The Ten Billion Tree Tsunami had a five-year timeline to achieve this goal.

Hardly two years into the project however, the world finds itself battling the COVID-19 outbreak, and Pakistan was confronted with thousands of day wage earners and labourers who were now out of work and unable to feed their families. In response to this, the government created a “green stimulus” where funds that was aimed at keeping the economy going also served a dual purpose of also helping the country achieve its green ambitions.

Today, over 63,000 of Pakistanis who lost their source of incomes as an impact of COVID-19 has been re-employed as “jungle workers,” planting trees as part of the Ten Billion Tree Tsunami project. The massive planting project is currently greening an area of approximate 6,000 hectares near the capital of Islamabad as well as other state-owned forest land in the country. The project also employs women and youths to work in nurseries and cultivating saplings. While the planting season usually ends in May, the project plans to keep the planting going until the end of June so that workers can be employed longer.

Powerful things happen when nature becomes a part of financial inclusion. It increases the value of investments which makes perfect business sense. It spurs economic growth which creates jobs, encourage education pursuits and sparks creativity. Most of all, it brings us closer to the vision of a more beautiful and a more equitable world. A world that would continue to awe us with its natural wonders. A world that has enough for everyone.


AFI's Inclusive Green Finance (IGF) workstream is part of the International Climate Initiative (IKI)  supported by the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU), based on a decision of the German Bundestag.