Microfinance Strategy for Pastoral Risk Management

What role does pastoral microfinance have to play in risk management strategies?

This study forms a preliminary study into the potential role of pastoral microfinance within a pastoral risk management strategy in a Mongolian context. This is intended to assist the Mongolian government in developing a coordinated and integrated pastoral risk management plan.

The article finds that there is a need for an experimental herder microfinance strategy, containing innovative new microfinance products, designed with and for herders. Key components of this strategy include:

  • The design of attractive savings products for herders, before or in combination with any further micro-credit;
  • A broadening of micro-credit products;
  • Development of collateral alternatives;
  • An evaluation of all restocking undertaken in Mongolia so far;
  • Experiments with index insurance as an alternative to livestock insurance;
  • Experiments with government or donor stop-loss or catastrophe insurance to limit the exposure of private insurers to catastrophic risk as an interim measure while procedures are being developed and insurance funds built up;
  • Experiments with leasing or hire purchase of bulky capital assets;
  • Investigation of the need for money management and financial planning services;
  • Development of an appropriate institutional structure for herder microfinance.