Enhancing farmers’ resilience to climate change-induced impacts through financial inclusion in Sidama region, southern Ethiopia

ABSTRACT

Building climate resilience is vital owing to the potentially severe effect of climate change. However, there is limited empirical evidence on the contribution of financial inclusion to climate resilience using household-level data. This paper adds to the literature by examining the potential role of financial inclusion in building farm households’ climate resilience. The study uses semi-structured interviews and structured questionnaires to collect relevant data from the Sidama region in southern Ethiopia. Principal component analysis is used to estimate a climate resilience index, and multiple linear regression is used to show the effect of financial inclusion on climate resilience. The results show that financial inclusion significantly and positively affects households’ climate resilience by increasing their asset ownership and diversification of income. Ownership of bank and microfinance institution accounts, mobile money services, and access to credit are the major financial services that contribute to climate resilience. However, there are certain factors limiting farm households’ level of financial inclusion. Thus, if the full potential of financial inclusion in building climate resilience is to be achieved, different strategies should be devised to increase its level and outreach.

KEYWORDS:

• Financial inclusion
• climate resilience
• mobile money services
• account ownership
• access to credit

Data availability statement

The data used in this study are available from the corresponding author upon reasonable request.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Ethics declaration

The author(s) has obtained ethics approval from the Norwegian Agency for Shared Services in Education and Research (NSD) under reference number 921873. The author(s) has also obtained informed consent from the respondents using a format provided by NSD.

Notes

1 The weights of the indicators were 1 for account ownership, 0.46 for debit card ownership, 0.54 for mobile money account ownership, 0.32 for savings, and 0.68 for access to credit.

2 The weights of the dimensions were 0.17 for penetration, 0.54 for availability, and 0.29 for usage.

3 The division was made based on the data using quartiles.

Additional information

Funding

This work was supported by the Norwegian University of Life Science.

Notes on contributors

Wuddasie Dereje Bekele

Wuddasie Dereje Bekele is Ph.D. candidate at Norwegian University of Life Sciences.