16. Financial Inclusion for Climate Resilience in Rural South Africa: A Qualitative Analysis of Opportunities and Barriers

South Africa has become increasingly exposed to climatic extremes that often lead to economic losses. With a growing emphasis on the importance of financial inclusion for risk reduction, financial services have an essential role in addressing the impact of climate-related disasters on household finances. Evidence suggests that access to formal financial services can help smoothen consumption, secure livelihoods, and reduce climate vulnerability after a climate-related disaster. However, studies show that vulnerable rural populations, who bear a disproportionate burden of climate stress, are ill-equipped to deal with shocks, and face significant financial barriers when trying to cope with the financial impacts of climate-related disasters. This study sought to better understand the extent to which financial inclusion contributes to climate resilience in the context of the sustainable development goal, target 8.10, and to identify critical barriers and opportunities faced by survivors of climate-related disasters in rural South Africa. The study involves original field research conducted in South Africa. Semi-structured, in-depth interviews were conducted with experts for the local financial services market, experts in the aid provisions process, and experts on the impact of adverse weather events. The interviewees identified more barriers than opportunities, and were particularly concerned with the extent to which the formal financial sector adequately addresses the needs and circumstances of vulnerable groups. The experts were of the opinion that the best opportunities lie in the informal banking system, and that most barriers can be overcome through digital literacy and financial training.