Linking financial services and social protection for resilience in Kenya

Climate – and other natural hazard-related disasters threaten people and communities around the world, compounding existing poverty and vulnerability and undermining long-term development and transformation. Facilitating the access to, and use of, adequate financial services such as savings, loans and insurance in underserved communities has shown potential to support resilience, allowing people to prepare for, cope with and adapt to shocks and stresses. The role of social protection programmes in helping people anticipate and cope with climate-related shocks such as droughts or floods is also increasingly appreciated.

The Kenyan government has recognised the importance of financial services for strengthening development and enhancing resilience, at the same time as it has engaged in efforts to increase the adaptiveness of its large-scale social protection cash transfer programmes. One of these, the Hunger Safety Net Programme (HSNP), currently operates in four northern Kenyan drought-prone counties, including Wajir, and aims to help vulnerable households deal with climate shocks. In parallel, the Mercy Corps-led PROGRESS project, which is part of the Building Resilience and Adaptation to Climate Extremes and Disasters (BRACED) programme, operates in Kenya’s Wajir county, where it provides pastoralist communities with access to Sharia-compliant financial services through a savings and credit cooperative, Crescent Takaful Savings and Credit Cooperative SACCO (CTS), and by supporting Village Savings and Loans Associations (VSLAs).

In this context, this paper explores how cash transfers and financial services are used, whether they support people in preparing for and coping with shocks and whether they help recipients make longer-term investments that could increase their adaptive capacity. It does this through a review of existing literature and by taking into account the perspective of CTS clients and HSNP beneficiaries gathered through original research undertaken through the BRACED programme in North-eastern Kenya. It thus aims to inform policy and programming by contributing to filling knowledge gaps around the potential, as well as the limitations, of more closely linking cash-based assistance and financial inclusion interventions to build the resilience of households to climate-related shocks and stresses. By assessing whether participation in social protection programmes facilitates access to financial services, it feeds into wider policy discussions in Kenya and beyond around integrated resilience interventions, financial inclusion, social protection and graduation.