SEEP Annual Conference 2015 Inclusion 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 SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge

SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge Resilience 101

SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge Resilience 101

SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge Testing Theories of Change

Financial Services as a Resilience Capacity SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge 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

SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge Typhoon Yolanda

SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge 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

SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge Program Approach Photo Credit: Skye Fitzgerald for Mercy Corps

SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge HOW DO WE KNOW IT’S BUILDING RESILIENCE?

Characteristics Approach SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge Impact Indicator Household Hunger Scale (range 0-4; 4 = most food insecure) 41 IndicatorsBaselineEndline 1. Adopted one drought resistant crop on > ¼ ha Using micro-irrigation > 1/10 ha01 3. Used weather forecast to decide when/what to plant Family member in a savings group01 5. Current savings > $2001 Total ‘resilience score’05 Shock/ stress

SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge a set of capacities used in connection with some shock/stress indexed to well-being outcomes Outcome-based Approach

SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge 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 CAPACITIESSHOCK EXPOSUREPOST 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 SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge

SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge WHAT DOES THE RESEARCH TELL US?

SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge Finding 1: Financial Services Matter 3 months after14 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% % Formal Loans, Pre 7.4% Formal loans, Aftern/a -29.9%**-6.467*** Informal loans, Pre % Informal loans, Aftern/a -11.5%* Bank Account, Pre Use of Insurance, any -4.9% Financial Literacy Score1.1%-9.59%***-.828* Total 2013 Income (Log)-1.9% % n/a Female FDM -6.8% -11.1%* Years of Education FDM-.3% ***

SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge 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% % Formal Loans, Pre 7.4% Informal loans, Pre %

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 SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge Finding 3: Formal savings and loans matter more in the long-term

SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge 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 SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge Finding 5: Supportive skill sets, attitudes and practices towards effective use of financial services are critical!

SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge Financial Services Matter in Other Contexts

SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge Video

SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge 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 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 family 3.“Other” – and education 4.Loss of livestock 5.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 consumption 3.Sell grain 4.Sell small livestock 5.Purchase on credit 6.Borrow from a SG 7.Work harder 8.Borrow from family 9.Delay repayment 10.Borrow from a financial institution Used multiple mechanisms 70% of time; average 3.5 at a time

Coping Mechanism Preferences: Used vs. Preferred BehaviorPreference 1. Savings1. Sell livestock 2. Reduce food consumption2. Borrow from SG 3. Sell grain3. Reduce food consumption 4. Sell livestock4. Savings 5. Purchase on credit5. Borrow from family and friends 6. Borrow from SG6. Sell grain

Preferred Features of Coping Mechanisms Why preferWhy NOT prefer AvailableInsufficient funds TimelyWill make family worse off (not enough food, profit loss, unmanageable debt) ReliableHonor or privacy compromised Effective – give amount needed Not available/reliable Flexible termsNot 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?

Nov 2015: forthcoming paper The Role of Financial Services in Building Household Resilience in Burkina Faso – SEEP Annual Conference 2015 Inclusion and Resilience: The Next Challenge Resources