SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge Freedom from Hunger and...

SEEP Annual Conference 2015Inclusion and Resilience: The Next Challenge

Freedom from Hunger and Mercy Corps with USAID

Pathways to Resilience: Comparative Evidence on

the Role of Financial Services

Quiz Questions

Q1: What was the last significant unexpected event or stressor that you experienced?

Q2: How do you use financial products to respond to these shocks?

Q3: Were the products or services helpful?

Resilience 101



Resilience 101


Resilience 101


Testing Theories of Change

Financial Services as a Resilience Capacity


Transformative

Rules, regulation and systems facilitate development of new products and services Norms, values, and practices enable access and effective use among diverse groups

Absorptive

• Food and NFI purchases• Restoring or finding new income

sources• Migration• Keep children in school• Protecting assets

Adaptive

• Purchase of improved, appropriate inputs

• Livelihood diversification• Expansion of markets


Typhoon Yolanda


Emergency Response Program: Theory of Change

Intended Impacts

Intended Outcomes

Activities Provision of Emergency Cash Assistance

Prevention of productive

asset shedding

Increased resilience to

future disaster

Increased recovery to pre-Yolanda

status

Re-establishment of livelihood assets and activities

Promotion of Savings Behavior

Increased use of bank

accounts and other financial

products

Increased propensity to

save

Supporting Access to Bank Account

and Loans


Program Approach

Photo Credit: Skye Fitzgerald for Mercy Corps Photo Credit: Skye Fitzgerald for Mercy Corps


HOW DO WE KNOW IT’S BUILDING RESILIENCE?

Characteristics Approach


Impact Indicator Household Hunger Scale (range 0-4; 4 = most food insecure) 4 1

Indicators Baseline Endline

1. Adopted one drought resistant crop on > ¼ ha 0 1

2. Using micro-irrigation > 1/10 ha 0 1

3. Used weather forecast to decide when/what to plant 0 1

4. Family member in a savings group 0 1

5. Current savings > $20 0 1

Total ‘resilience score’ 0 5

Shock/stress

= ?


a set of capacities

used in connection with some shock/stress

indexed to well-being outcomes

Outcome-based Approach


Financial Access:• Use of financial tools• Financial literacy

• Severity of typhoon damage

3 months• Coping strategies index

• Self-reported recovery from Yolanda

• Predictive Economic Resilience Index

14 months:• Coping strategies index

• Poverty Likelihood Change

CAPACITIES SHOCK EXPOSURE POST SHOCK OUTCOMES

HH CONTROLS• 2013 HH income• asset index, poverty

likelihood (PPI), • HH size, • HH land ownership,• education and literacy of

financial decision maker

Analysis Framework

• Integrated into

program M&E, including impact evaluation

• Retrospective baseline for pre-shock status

• Objective measures of exposure to the shock

• Multivariate regression analysis at baseline and endline

Strengths



WHAT DOES THE RESEARCH TELL US?


Finding 1: Financial Services Matter3 months after 14 months after

Coping strategies

index

Reported recovery from

Yolanda

Predictive Economic Resilience

Index

Coping Strategies

Index

Poverty Likelihood

Change (PPI)

Savings Formal, Pre -3.3% -34.9%* -Savings Informal, Pre -1.9% 2.12 8.1%

Formal Loans, Pre 7.4%Formal loans, After n/a n/a -29.9%** -6.467***Informal loans, Pre 1.31 9.3%

Informal loans, After n/a n/a -11.5%*Bank Account, Pre

Use of Insurance, any -4.9%Financial Literacy Score 1.1% -9.59%*** -.828*Total 2013 Income (Log) -1.9% 1.18 2.2% n/a n/a

Female FDM -6.8% -11.1%*Years of Education FDM -.3% 1.05 -1.019***


Finding 2: Informal matters most in immediate aftermath

3 months after

Coping strategies index

Reported recovery from Yolanda

Predictive Economic Resilience Index

Savings Formal, Pre -3.3%

Savings Informal, Pre -1.9% 2.12 8.1%

Formal Loans, Pre 7.4%

Informal loans, Pre 1.31 9.3%

Formal loans = 29.9% in negative coping

strategies 6.5 % points in being

under the poverty line

Formal savings = 35.5% in negative coping

strategies


Finding 3: Formal savings and loans matter more in the long-term


Finding 4: Financial inclusion must be tailored & bundled for diverse needs: coping, recovery, well-being

Formal products are not as effective post-shock

Lump sum cash mattered for restoring productive assets

Insurance = 4.9% perceived resilience to economic shocks

Higher financial literacy scores = • savings for female decision-

makers• 9.59% in harmful coping

strategies, 14 months after

Female financial decision-maker = • 11.1% in negative coping

strategies, 14 months after


Finding 5: Supportive skill sets, attitudes and practices towards effective use of financial services are critical!


Financial Services Matter in Other Contexts


Video


Understanding Resilience

in Burkina Faso

Freedom from Hunger

Key Questions

Grant awarded from Consultative Group to Assist the Poor (CGAP) to study resilience of the rural poor in north-central Burkina Faso;

May 2014 – October 2015

Key questions:1. How do rural households manage economic,

environmental and health shocks?2. What roles formal, non-formal and informal financial

products play in improving household resilience?

Research Activities

1. Formative research

2. Economic games testing management of health shocks with shock-specific financial tools

3. “Resilience diaries”1. 10 surveys from August 2014-February 2015

4. Qualitative follow-up

Context: Demographics

• 46 women from rural Burkina Faso – ½ RCPB village banks, ½ ODE SG members

• Average age: 46 yrs old

• 85% cannot read

• 64% live below $1.25/day international poverty line

• 89% chronically food-insecure

• 66% in polygamous marriages

• Limited access to formal financial services; credit & remittance services mostly

Shocks

Average of one shock per month. Most common:

1. Illness or injury (child, then adult)2. Death in the family3. “Other” – and education4. Loss of livestock5. Poor harvest (loss of income)

Hunger: at least 67% were food insecure at any point

Coping Mechanisms

Most common:

1. Personal or household savings 2. Reduce food consumption3. Sell grain4. Sell small livestock 5. Purchase on credit6. Borrow from a SG7. Work harder8. Borrow from family9. Delay repayment10. Borrow from a financial institution

• Used multiple mechanisms 70% of time; average 3.5 at a time

Coping Mechanism Preferences: Used vs. Preferred

Behavior Preference

1. Savings 1. Sell livestock

2. Reduce food consumption 2. Borrow from SG

3. Sell grain 3. Reduce food consumption

4. Sell livestock 4. Savings

5. Purchase on credit 5. Borrow from family and friends

6. Borrow from SG 6. Sell grain

Preferred Features of Coping Mechanisms

Why prefer Why NOT prefer

Available Insufficient funds

Timely Will make family worse off (not enough food, profit loss, unmanageable debt)

Reliable Honor or privacy compromised

Effective – give amount needed

Not available/reliable

Flexible terms Not timely enough

Two Main Conclusions on Coping with Shocks:

1) The drivers of decision-making are the availability of coping mechanism resources, and risks associated with using each mechanism

2) Features which matter most are availability and timeliness, then reliability, effectiveness, preventing a family from being worse off (avoiding aggravated food insecurity, early sale of livestock or acquiring unmanageable debt), preserving family honor and privacy, and flexibility.

Other Observations

• Financial services play a significant role in managing shocks and building resilience – Informal play larger role than formal, as expected

• Need help with lean season the most; point of pushing down vulnerability pathway or one of resilience

• Use more negative coping mechanisms than positive ones; capacity to respond to shocks are not preventing long-lasting development consequences

• Worsening situation: re-occurring drought and food crisis every 2-3 years

• Gender: several barriers, useful to “awaken conscious” of others• Economic games outcomes support that shock-specific products can

help; health savings and loans can make people better off

Recommendations

1. Incorporate design features that matter most: availability and timeliness

2. Prioritize food security in the design and implementation of financial services.

3. Understand the multiple obstacles women face and innovate specifically to help them navigate those barriers.

4. Increasing savings is one of the best ways to make a household more resilient.

5. Create products for specific shocks.

Recommendations

6. Insurance, if understood well, help the poor manage risk.

7. Offer credit cautiously, and combine it with financial education.

8. Multi-component models such as the graduation programs are well-suited for this highly vulnerable population.

9. Continue expanding access to mobile-based product and services to women.

Thank you!

Group Discussion Questions

1. What are the shocks the poor experience? Pick a world region if prefer

2. What financial products and services do they use to respond to shocks?

3. What are some obstacles people encounter in using them more effectively?

4. Do people need specialized products?5. For the FSP groups: What would FSPs need to offer

specialized products? 6. For the NGO groups: What role can NGOs play in helping

the poor access financial products and services to respond to shocks?

• www.freedomfromhunger.org• Nov 2015: forthcoming paper The Role of Financial

Services in Building Household Resilience in Burkina Faso– [email protected]


Resources

http://www.freedomfromhunger.org/

mailto:[email protected]

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SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge Freedom from Hunger and...

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