Microfinance to help poor communities with climate change adaptation

This morning I decided to wake up really early and catch the 7 AM bus to the COP, hoping I would cut down my 1 hour commute. It worked. By 8 AM I was sitting and waiting for an early presentation on microfinance of innovating products and services for poor communities vulnerable to climate change. The bad news is that by 8:30 I was still the only person in the audience, and the event was 30 minutes late already.

So, Christoph Jungfleisch, Senior Project manager for MEBA (microfinance for ecosystem based adaptation), a UNEP program, approached me, explained the situation and decided to give me a private talk on what they are working on. The project is financed by the German Environment Ministry. The emphasis seems totally on adaptation, not mitigation. They are focused on Peru and Colombia and as expected are heavily focused on agriculture. The average interest rate is 40%, Christoph said. He immediately proceeded to explain how 40% is actually a low interest rate for the region. He also explained that 80% of the cost of financing is in overhead, not risk. He also explained that the risk is very low, but because the cost for them of loaning $100 is the same as loaning $10,000, and loan amounts are usually very small, interest is proportionally high.