Risk-Ready: Microfinance Backs African Businesses Against Climate Change
Although Africa has contributed only 7 per cent of global carbon emissions since the 19th century, it remains the most vulnerable region to the adverse effects of climate change. The International Rescue Committee (IRC) estimates that seven of the 10 countries at the highest risk are in Africa. Somalia, Chad, South Sudan, the Democratic Republic of Congo, and Nigeria are among those countries.
The impacts of climate change pose a significant threat to the region’s progress toward achieving the Sustainable Development Goals (SDGs) defined by the United Nations. Rising temperatures, droughts, and flash floods generate food insecurity and growing economic inequality, which have increased poverty levels.
The situation is especially tough for micro and small businesses, as well as farmers across the continent. Given the increasingly present risk to African populations, Advans, a leading microfinance group in Africa, has developed a climate strategy to support its MSME and farmer clients to build their capacity for adaptation and resilience.
This strategy encompasses both financial and non-financial solutions to help them recover from shocks and prepare for the future. Advans is piloting this strategy in Côte d’Ivoire, Ghana, and Tunisia, with plans to expand it to additional subsidiaries in the future.
Ghana has faced over 27 major floods in the past 30 years, with 15 of those affecting Accra, the country’s capital. It is reported that seven out of 10 Ghanaians lack access to insurance, and 42 per cent of the population remains excluded from basic financial services, leaving them without any means to recover from a climate shock.
Advans’ studies and client interviews have shown that in Tunisia, water scarcity is the most serious climate-related risk for farmers in the cereal, market gardening, and livestock sectors. Meanwhile, in Côte d’Ivoire, climate change is heavily impacting the cocoa sector, with reduced rainfall, rising temperatures, and shifting seasons having negative consequences on producers’ yield.
Advans estimates that 22 per cent of clients in its portfolio in the three pilot markets for the climate strategy are vulnerable or highly vulnerable.
Advans, therefore, aims to integrate climate risks directly into its operations and overall strategy. This approach first requires a thorough understanding of how climate risks affect the various geographies and sectors that Advans serves. It then involves developing financial products that help clients adapt and recover, while raising their awareness of climate challenges.
Four Key Pillars of Advans’ Climate Strategy
1. Raising Awareness Among Teams
Advans places great emphasis on building climate awareness among its management and staff, especially those who serve clients directly. Employees at all levels are trained on the causes and effects of climate change and how this impacts customers, enabling them to act as ambassadors in the field.
Over 700 staff members across the group participated in the Climate Fresk workshop, and Advans is currently deploying online and classroom modules on climate risks and client awareness for field staff.
2. Evaluating the Impact of Climate Change on Its Portfolio
Advans’ risk analysis aims to evaluate:
i) Which climate hazards are going to impact the areas where its clients operate.
ii) To what degree each client and each sector is vulnerable to these hazards.
These two elements are then combined to determine a physical risk score. This allows the Advans Group to map climate risks in its portfolio and identify the hazards that will impact clients the most.
For example, Advans’ work with Horus Development Finance has shown that around 25 per cent of borrowers in Ghana are currently at significant or very high risk of flash floods.
3. Building the Resilience of Vulnerable Clients Through Awareness and Education Programmes
Advans supports its clients who face flooding, droughts, or fires through awareness and educational programmes.
In Ghana, the company has been raising awareness about flood mitigation methods, distributing flyers with key advice, and sending targeted alerts via mobile and social media at the start of the rainy season. Advans Ghana has already reached nearly 20,000 users through this campaign.
Advans also plans to launch client training programmes on climate adaptation practices for farmers in Côte d’Ivoire and Tunisia.
4. Adapting Products and Services to Strengthen Resilience in the Long Term
To help entrepreneurs manage emergencies and prepare for the future, Advans aims to better integrate climate considerations into its product design.
Some of Advans’ services already support clients in building resilience — for instance, 59 per cent of farmers in Tunisia reported being better prepared for a climate shock thanks to Advans loans (2024, 60 Decibels study with 280 farmers).
In Côte d’Ivoire, Advans has piloted an innovative index and yield insurance to protect cocoa farmers in case of extreme climate shocks, with over 2,300 farmers covered in 2024–25.
In Ghana, Advans is piloting a new insurance and loan package to help clients restart their businesses following an extreme event. The loan is available to clients with a good repayment history and includes coverage for losses, a grace period, a preferential interest rate, and flexible repayment terms.
In today’s rapidly evolving African economy, adaptability is crucial for success. This principle guides efforts to help small businesses and entrepreneurs recover from climate-related crises.
Organisations like Advans have proven that financial inclusion in Africa can drive meaningful and sustainable change. This is a powerful call to action for others to join this vital journey.
The roadmap is clear: let’s harness the power of microfinance to equip African businesses with the resilience they need to sustain their activities and continue growing in the face of climate challenges.
The writer is Deputy Chief Executive Officer (CEO), Advans International