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This blog post was originally published on the FinDev Gateway blog
The rainy season in Ghana can be a difficult time for small businesses, as thousands have their operations disrupted each year by flooding. The dry season does not always provide reprieve either, as it can bring extreme heat and wildfires. With climate change intensifying, these risks are growing by the year and impacting many of our clients at Advans Ghana, a key player in micro finance in Africa and part of an international group of microfinance institutions.
As part of our climate strategy at Advans, we are working to develop targeted responses to support clients affected by climate-related events, starting in Ghana. This work, which is supported by FMO with technical support from Milliman and Horus, includes improving and designing products and processes that strengthen clients’ resilience and aid in their recovery. Our first step in this strategy was to conduct a climate risk assessment, from which we identified floods and fires as the main climate risks our clients face, an important issue in the context of financing climate change adaptation and strengthening SME financing in Africa.
To understand the concerns and needs of our clients when a climate event hits, we interviewed over 30 clients who had been affected by floods and fires in the past. These interviews shed light on the challenges faced by entrepreneurs relying on micro lending, and other forms of micro financing in Africa. They are covering three dimensions:
– Immediate response: What are clients’ needs (financial and other) in the days following the event? What sources of funding do they have?
– Post-disaster recovery: What support do clients require to get their business back up and running?
– Preparedness: How can clients be better prepared for any future climate event?
These field discussions showed us that clients’ primary need after a destructive climate event was the ability to restock and repair what they had lost, in order to get their businesses operating again.
Other takeaways included:
– Informal financial support from family and friends is very important (80% received this type of support), but not enough to recover completely.
– Women often have more informal support sources available (family, friends, women’s groups), even though they are on average more vulnerable than men: an important insight for strengthening microfinance and women initiatives.
– Family and household expenses were not the main concern for most clients immediately after the event, as they covered these expenses themselves through savings or support from relatives.
– Insurance payouts on the outstanding loans after an event were a key source of satisfaction for clients, though sometimes the claims process was seen as burdensome.
– Clients appreciated contact from their client relationship officers after the event: on-site visits and support in making insurance claims were particularly valued.
Based on the feedback from both clients and staff, we are now working on a recovery lending product called a Restart Loan. The Restart Loan aims to prevent excessive business interruption, helping clients to rebuild their businesses and retain income sources. The overall goal is to enable faster recovery and rebuild client financial stability. Potential features include:
– Amount: Can be a top-up loan if the client has only lost part of their stock, or a full loan if the stock has been completely destroyed.
– Grace period: To allow the client time to build business in the first one to three months.
– Reduced rates:To take into account the fact that the client is in a vulnerable situation.
– Flexible duration:Based on the business needs.
We piloted the first version of our Restart Loan following the devastating fire at Kantamanto Market in Accra in January 2025. As one of the world’s largest secondhand clothing markets, Kantamanto is a vital economic center and the fire disrupted hundreds of businesses. Over 220 clients of Advans Ghana lost their entire shops. After providing affected clients with insurance payouts, we introduced the Restart Loan to help them reinvest in their businesses, restock inventory and stabilize operations. The loan was tailored with flexible features, including a grace period and reduced interest rates, to better facilitate recovery. More than 50 clients have benefited from this pilot product so far.
The pilot has helped us identify challenges in implementation and learn how to manage them. For example, we found that conducting a loan appraisal after a climate event can be tricky, but FSPs can use a combination of client history and business recovery plans to assess clients’ loan eligibility. We also learned that clients may lack confidence after a traumatic event and could need additional support to get back on their feet.
The pilot will provide valuable experience for future versions of the Restart product. However, knowing that no climate event is the same in terms of scale and impact, we believe that each climate response should be flexible. That means that a Restart loan product cannot be set in stone and deployed exactly the same each time. Rather, it should be designed with a set of options and guidelines which can be adjusted when an event hits, to respond quickly and efficiently to clients’ needs and help them get back to business.
the Restart loan, we are also looking to improve our loan insurance to simplify and speed up the claims process for clients, and to establish an emergency response procedure to be able to react quickly when climate events occur.
By listening to clients, learning from each disaster and continuing to adapt our products and processes, Advans Ghana is committed to supporting entrepreneurs as they face the uncertain future climate change brings. Our goal is to ensure that when the next flood or fire comes, our clients are not only better prepared, but better equipped to bounce back and thrive, reflecting the mission shared across our group of microfinance institutions in Africa.
FinDev Gateway is an independent knowledge platform managed by CGAP. It serves as a global hub where the financial inclusion community shares cutting-edge research, insights, and innovations aimed at improving financial services for people living in poverty.