Risk Financing for Rural Climate Resilience

In 2014, the CEP conducted a study to assess how risk financing could help strengthen the climate resilience of rural households.  Such financing mechanisms have been set up in other parts of the world, but little was known about their potential in the GMS until this study.

The study assessed the frequency and severity of climate-related disasters, the impact of these events on rural livelihoods, and how local people manage climate risks in 28 rural communities in Cambodia, the Lao PDR, and Viet Nam. It also explored the potential of climate risk financing strategies to build community resilience.

The study found that agrarian communities are often beset by droughts, floods, and storms, which sometimes severely damage livelihoods.  Nearly all these communities already face considerable socioeconomic challenges and severe climate events can tip many into extreme poverty. Nearly all of the rural households have some means of managing climate and other risks through diversified farming practices, social capital networks, and reliance on public assistance. But they are ill-equipped to cope with severe climate shocks.

The study’s main conclusion is that a mix of climate financing risk mechanisms are needed to effectively protect rural communities from destructive climate events, even though these mechanisms come with considerable financing and organizational requirements. There is potential to incentivize household saving schemes, and create disaster risk funds at the community, national, and even subregional levels. The CEP’s 2016 publication Risk Financing for Rural Climate Resilience in the Greater Mekong Subregion examines this issue, presents findings, and offers recommendations for the greater use of risk financing.

Climate risk financing, along with climate proofing of rural infrastructure, are two investment projects to be prepared by the CEP under its 2018–2022 strategic framework and action plan.

“Households from the Koh Kong coastal zone reported as much as a 90% loss in economic income from paddy rice due to seawater intrusion events.”
-- Risk Financing for Rural Climate Resilience in the Greater Mekong Subregion. Page 18. (2017).

Publish Date: 30th March 2018

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