11 December 2023

How financial inclusion can help combat climate displacement

By Johanna Nyman, Head of Inclusive Green Finance, Mariam Zahari, Policy Specialist, and Gift Mpoola, Consultant, AFI

In 2022 alone, natural disasters displaced over 36 million people across the globe, forcing them to abandon their homes in search of new livelihoods. How can financial inclusion support environmental migrants, or even prevent them from having to flee their homes in the first place? And what can financial regulators and policymakers do?

Access to financial services is essential for people affected by climate change or those fleeing natural disasters. Savings, loans, insurance, payment systems, and digital financial services like mobile money have all proved effective in building resilience and easing adaptation to climate shocks. Financial policymakers and regulators can play a key role in facilitating access to these services. Here’s how:

1. Adjust National Financial Inclusion Strategies (NFIS)

Despite their absence from many NFISs, measures addressing forcibly displaced people (FDP) and inclusive green finance (IGF) are both critical to tackling climate displacement. Environmental migrants need financial services to rebuild their lives and contribute to the local economy, while IGF aims to build resilience to climate shocks, meaning they may not need to flee their homes in the first place. Financial policymakers and regulators therefore need to integrate FDPs and IGF into national financial policies and strategies, and promote their importance among financial service providers (FSPs). Recently, both the Philippines and Fiji have integrated strong green pillars into their NFIS.

2. Boost stakeholder collaboration

Partnering with governments, private sector players, international development organizations, and specialized research institutions is key. This can mobilize critical resources and help draw up well-informed policies that enhance climate resilience and help environmental migrants get back on their feet. AFI members like the Bank of Uganda and the Jordan Payments & Clearing Company (JoPACC) actively collaborate with stakeholders including UNHCR and government agencies to help support forcibly displaced populations.

3. Collect data

Financial service providers often lack the necessary context, data, and knowledge to design products that meet environmental migrants’ needs. Insufficient data also prevents them from accurately pricing climate-related products, particularly insurance. Financial policymakers and regulators can help collect and distribute data that can guide FSP product development. A good starting point is conducting tailored, demand-side surveys on environmental migrants’ coping mechanisms before, during, and after natural disasters.

4. Get involved in national resilience building

Climate change has led many governments to develop national  adaptation plans, but FDPs are often excluded from these initiatives. By getting directly involved in national disaster risk management structures, financial policymakers and regulators can help promote more inclusive policies for environmental migrants. The Reserve Bank of Malawi and Banco Central de Mocambique are both actively involved in advancing financial inclusion for people internally displaced by cyclones.


Looking ahead

More research is needed to understand how financial inclusion can positively impact climate displacement. What is certain is that focusing attention on FDPs and on inclusive green finance will assist vulnerable communities to withstand some of the worst impacts of climate change. By embracing these principles, financial policymakers and regulators can play a leading role in preventing climate displacement and help environmental migrants get back on their feet.


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