Paper

The Role of Financial Services in Building Household Resilience in Burkina Faso

Understanding how financial services contribute to household resilience and poverty reduction

The primary theory of change for the microfinance industry has historically been one in which access to and use of formal financial services reduces household poverty. Newer theories of change suggest that the use of financial services for poor households results in resiliency. In effect, financial services help households anticipate, adapt to, and/or recover from the effects of shocks in a manner that protects their livelihoods, reduces chronic vulnerability, and facilitates growth.

To fill some of the gaps in knowledge about how financial services contribute to household resilience, CGAP engaged Freedom from Hunger to conduct a research project with two of its partners in rural Burkina Faso: le Réseau des Caisses Populaires du Burkina Faso (RCPB), a credit union that provides formal financial services, and the Office de Développement des Églises Évangéliques, a nongovernmental organization (NGO) that facilitates savings groups. The research agenda was designed to answer two research questions:

  • What strategies do poor households employ to manage economic, environmental, and health shocks that disrupt their financial lives?
  • What roles do formal, nonformal, and informal financial products play in improving household resiliency and building assets?

Overall, the demand for financial services to anticipate and cope with shocks appears widely unmet. For financial services to help the poor build resilience, they need to be designed to provide vulnerable households with more viable options. This research yields further recommendations for designing products and services aimed at improving resiliency.

About this Publication

By Gash, M. & Gray, B.
Published