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- Title
Adapting to Climate Risk With Guaranteed Credit: Evidence From Bangladesh.
- Authors
Lane, Gregory
- Abstract
Climate change is increasing the frequency of extreme weather events, with low‐income countries being disproportionately impacted. However, these countries often face market frictions that hinder their ability to adopt effective adaptation strategies. In this paper, I explore the role of credit market failures in limiting adaptation. To achieve this, I collaborate with a large microfinance institution and offer a randomly selected group of farmers access to guaranteed credit through an "Emergency Loan" following a negative climate shock. I document three key results. First, farmers who have access to the emergency loan make less costly adaptation choices and are less severely affected when a flood occurs. Second, I find no evidence of adverse spillover effects on households that did not receive the Emergency Loan. Finally, I demonstrate that providing the Emergency Loan is profitable for the microfinance institution, making it a viable tool for the private sector to employ in similar circumstances.
- Subjects
BANGLADESH; CREDIT risk; EXTREME weather; LOW-income countries; LOANS; BOND market
- Publication
Econometrica, 2024, Vol 92, Issue 2, p355
- ISSN
0012-9682
- Publication type
Article
- DOI
10.3982/ECTA19127