Climate shocks and adaptation strategies in coastal Bangladesh: does microcredit have a part to play?

ABSTRACT

Microcredit has become a component of global development. Recently, the climate change and disaster community have proposed that it may be able to facilitate climate change adaptation, but whether this is the case remains under-researched. Addressing this gap, this paper examines the question in relation to microcredit’s ability to support adaptation strategies that effectively address vulnerability to climate shocks in three villages in the Bagerhat and Chattogram districts of coastal Bangladesh. The findings provide qualitative evidence that at-risk people often use microcredit as a response to climate shocks. However, the case study only finds evidence that microcredit supports coping and incremental adaptation. Findings suggest shocks (some climate-related and some not) can result in reduction in food consumption, erosion of assets, depletion of savings, increased debt, and debt default, ‘trapping’ at-risk people in indebtedness through a process of cumulative vulnerability. Lack of outreach of microcredit, erosion of assets, supply barriers, and lack of credit alternatives reduce microcredit’s potential to address the persistent determinants of vulnerability.

KEYWORDS:

• Climate change adaptation
• vulnerability
• coping
• microcredit
• informal lending
• indebtedness
• Bangladesh

Acknowledgements

The author would like to thank the French National Research Agency and the Institute of Spatial and Environmental Planning, Queen’s University Belfast for financially supporting this research. This study also benefitted from the institutional support of Bangladesh Centre of Advanced Studies, Rupantar (Khulna and Mongla), Centre for Sustainable Development, University of Liberal Arts, Bangladesh and Young Power in Social Action. The author would like to thank Nibras Sakafi, Mohsina Mahin, Ataul Karim, Agathe Cavicchioli, Farhana Syeda and Morshedur Rahman Sagor for their translation and assistance during fieldwork. In particular, I would like to thank the participants in this research, especially the generous participation of the village inhabitants of the field sites. Finally, I would like to thank the editor, editorial assistant, two anonymous reviewers, David Hulme, Dan Brockington, Brendan Murtagh, Alex Magnan and Geraint Ellis for their helpful comments on drafts of this paper. The author bears full responsibility for the text that follows.

Disclosure statement

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

Notes

1 Microcredit extends loans to individuals using social rather than material collateral.

2 The case study analyses adaptation to climate shocks – risk to human life and livelihoods – rather than climate change – future anthropogenic change in climate in either environmental or social aspects. One way to classify climate shocks is temporal: rapid-onset events and slow-onset processes. Rapid-onset events include cyclones, which are sudden and dramatic and last for a short period. By contrast, slow-onset processes include salinity intrusion and erosion, which takes place over a longer period of time but has significant impact.

3 However, sequences of incremental adjustments (if they are additive) may set in place pathways toward transformation (Rickards and Howden, 2012). Conversely, additive incremental actions can lock systems into sub-optimal trajectories and delay transformation, potentially increasing risk (Matyas and Pelling, 2015; Vermeulen et al., 2018).

4 See Schicks (2014) for an in-depth overview of over-indebtedness in microfinance.

5 An Upazila is a sub-district in Bangladesh.

6 Formerly known as Chittagong.

7 Grameen Bank made loans to 8.64% of households in Chattogram and 10.35% in Bagerhat. BRAC made loans to 0.71% of households in Chattogram and 10.63% in Bagerhat. Neither entity would clarify how their criteria led to these distinctions.

8 Female and male focus group discussions were conducted separately to encourage females to participate and express their opinions freely and openly.

9 This paper will only refer specifically to case study village 1, 2, or 3 when the evidence is specific to that particular location. Otherwise the evidence presented refers to the findings of all three of the case studies.

10 1 British pound = 105 Bangladeshi taka.

11 Covariate shocks affect entire communities or large parts of the population at the same time (e.g. cyclones).

12 Approximately 1.82% to 2.21% monthly equivalent compound interest rate.

Additional information

Funding

This work was supported by Agence Nationale de la Recherche; Queen’s University Belfast.

Notes on contributors

J. C. Jordan

J. C. Jordan is an environmental social scientist working on the interconnected problems of climate change and poverty. She specialises in three broad interlinked themes: climate change resilience, adaptation and vulnerability of low-income and disadvantaged groups; risk perception and culture; and climate change communication through the creative arts.