Building Resilient Rural Communities & Financing Sustainable Ecosystem Management in the Global South
Across the Global South, fishers, farmers, and other resource users live close to a wealth of natural resources. But without access to formal financial services like bank accounts, formal debt or insurance, they are often unable to benefit from sustainably managing those resources. Meanwhile, financial service providers and global development organizations often lack suitable mechanisms to effectively deliver resources to these communities.
Where traditional financial systems and strategies fail, innovative finance can bridge the gap. Rare’s Innovative Finance program connects the formal financial sector and rural and remote communities on the frontlines of our greatest environmental challenges. By developing and implementing innovative financial products, delivering in-person trainings, working directly with financial institutions, and using a people-centered, science-based approach to engage communities, Rare breaks down barriers separating coastal and rural communities and the formal economy.
The result: Economically resilient communities that benefit from sustainably managing their natural resources.
What is the formal economy?
The formal economy refers to legally recognized entities with access to traditional financial services such as savings accounts, insurance, and affordable financial loans. Most fishing and farming communities are rural and remote, far from banks and other financial institutions. In these communities, micro-businesses often exist outside legal frameworks meaning they are not recognized by the government and prohibited from accessing capital or insurance. These microbusiness owners and people also do not benefit from government benefits such as social security and subsidies. Without access to formal financial services, fishers, farmers and other rural residents are impacted by family emergencies, climate change, natural disasters, and pandemics.
Elements of Innovative Finance
Microbusiness Formalization and Capacity Building
Rare trains microbusiness leaders on the real and perceived barriers of entering the formal economy. We build their capacity to register their business and access formal financial services. We equip microbusinesses with the competencies and tools for improved financial management and financial inclusion, thereby elevating their economic resilience against impacts from household emergencies, natural disasters, and pandemics. We also use technology to empower both communities and formal institutions to track and share financial information more easily.
Example: Our pilot microbusiness program in Indonesia successfully registered 73 microbusinesses as legally recognized entities while providing capacity building and business skills to microbusiness owners and entrepreneurs.
Individual Financial Identities
Rare helps community members establish their financial identity, build savings, and track financial transactions—opening the doorway to formal financial services.
Example: Rare has designed and piloted a digital ledger app to capture and digitize every transaction in each of the 500 savings clubs we support.
Indemnity and Parametric Insurance
Rare designs and deploys different insurance types to help cover local communities from the financial fallout of climate change. Whether it’s more traditional indemnity insurance or innovative parametric insurance, Rare works with financial institutions, insurance providers and communities to meet the needs of fisher households.
Example indemnity insurance: Rare assessed the unique insurance needs of fishing-dependent households and the landscape of available products in seven different coastal communities across the Philippines. Rare then partnered with local insurance providers to offer two policies as part of a pilot that aimed for 500 participants, but resulted in 4,000 enrolled policy holders.
Example parametric insurance: Rare designed and piloted a first of a kind parametric insurance solution for fishers in the Philippines to combat income losses from prolonged periods of adverse weather conditions which prevent safe fishing. The pilot is sized to provide protection to 50,000 registered fishers.
Natural Climate Solutions
Natural Climate Solutions (NCS) are conservation, restoration, and improved land management actions that store carbon or avoid greenhouse gas emissions across forests, wetlands, grasslands, and agricultural lands. Nature-based Solutions (NbS) go beyond NCS to include non-terrestrial ecosystem climate action, as well as Blue and Terrestrial Carbon. When implemented effectively, these natural climate solutions drive financial resources to local communities who sustainably manage these vital resources.
Example: In the Nampula province in Mozambique, Rare is using a community-based, behavior-centered campaign to build support for the protection of mangroves and seagrass beds as key climate change-fighting ecosystems.
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