Using Inclusive Finance to Significantly Scale Climate Change Adaptation

Reversing land degradation and achieving ecosystem restoration and management are routes to climate change adaptation and mitigation. The financial resources to achieve this are increasingly available. A major challenge is the absence of scalable mechanisms that can incentivize rapid change for rural communities at the decade-long time scale needed to respond to the climate emergency. Despite moves toward inclusive green finance (IGF), a major structural gap remains between the funding available and the unbankable small-scale producers who are stewards of ecosystems. This chapter reports on inclusive finance that can help fill this gap and incentivizes improved ecosystem stewardship, productivity, and wealth creation. A key feature is the concept of eco-credit to build ecosystem management and restorative behaviors into loan terms. Eco-credit provides an approach for overcoming income inequality within communities to enhance the community-level ecosystem governance and stewardship. The paper discusses the experience of implementing the Community Environment Conservation Fund (CECF) over a 8-year-period from 2012. The CECF addresses the unbankable 80% of community members who cannot access commercial loans, has c. 20,000 users in Uganda and pilots in Malawi, Kenya, and Tanzania. The model is contextualized alongside complementary mechanisms that can also incentivize improved ecosystem governance as well as engage and align communities, government, development partners, and the private sector. This complementary infrastructure includes commercial eco-credit as exemplified by the Climate Smart Lending Platform, and the community finance of the Village Savings and Loans Associations (VSLA) model upon which CECF builds. The paper describes the technologies and climate finance necessary for significant scale-up.