This paper talks about possibilities of using microfinance as a coping strategy or tool for reducing peoples’ vulnerability to climate change. In doing so, the paper identifies possible links between microfinance services and climate adaptation and highlights the opportunities and the risks for reducing vulnerability among the world’s poorest populations. Reducing peoples’ vulnerability to climate change is closely linked to the poverty reduction agenda, since poverty is both a condition and determinant of vulnerability.

Experiences of several Microfinance Institutions (MFIs) in disaster-prone areas have demonstrated that access to microfinance services can support disaster preparedness and risk reduction by decreasing client vulnerability. When clients have access to needed financial services during crisis situations, the impact of the disaster may considerably lessen. This guidebook is rooted in the philosophy that providing services which enable clients to prepare for future crises and mitigate their impacts is major element of the work MFIs do.

Empirical evidence shows that increasing women’s control over land, physical assets, and financial assets serves to raise agricultural productivity, improve child health and nutrition, and increase expenditures on education, as women are more likely than men to spend income on food, healthcare and the education of their children.

This article summarises some of the ways in which environmental change is linked to insecurity.

Providing credit is the primary goal of microfinance projects. But on its own this can be an ineffective response to chronic poverty. Research from India has shown that projects which take a broader approach can yield surprising results. A report from India's Utkal University describes the model of self-help groups used by the Centre for Youth and Social Development (CYSD). Questioning conventional wisdom in the microfinance industry, it argues that credit by itself will never lift marginalised women out of poverty.