Advancing Financial Resilience

The Financial Resilience program seeks to promote understanding of financial resilience – the ability of a household or community to prevent, sustain, or recover from financial shocks – in marginalized populations in high-risk/high-stress environments. In particular, we seek to explore how communications technology and externally driven microfinance interventions influence household resilience.

The field of microfinance is bursting with pioneering products, services, and breakthrough technologies, yet the industry still lacks hard evidence about the impact of these innovations. The FiRe program is a direct response to this need. We seek to conduct a series of rigorous impact assessments and identify specific measures of service effectiveness. We believe that better understanding of interventions and the market will enable providers to better serve unbanked and underbanked populations.

In 2007-2008, Tufts/FIC conducted a literature review of financial resilience and preliminary field studies in Haiti, Sudan, and Ethiopia. We found that suppliers of financial services and technologies operate on several assumptions: increased access to credit, savings services, and insurance improves a household’s ability to increase assets; increased assets alone lead to financial resilience; improved technologies help bring quality financial services to previously underserved populations.

However, there is almost no empirical research that tests these assumptions. We lack evidence that increased access to financial services increases the assets of marginalized households. A microcredit loan can increase assets but also increase household debt; increased savings could simply substitute for other important, perhaps more secure, household assets. Nor do we know if increased assets lead to increased net worth (assets minus liabilities), our indicator of financial resilience. In order to understand the true impact of financial interventions on household resilience, we need a firmer base of evidence.

This project has identified a range of interventions that have had successes in supporting financial resilience as part of our wider Disaster Risk Reduction program.

Additionally, the project has produced a set of guidelines for financial service providers (FSPs): Serving Refugee Populations: The Next Financial Inclusion Frontier. The document seek to examine why refugee populations are financially excluded and how FSPs can successfully reach and serve this untapped financial market segment. These guidelines were developed by Lene Hansen for the Social Performance Task Force (SPTF) under a UNHCR-funded project, and they are out for public comment.