The struggle for survival through micro-entrepreneurial activities can force individuals to make difficult choices, sometimes leading to environmentally unsustainable practices (e.g., water pollution, groundwater depletion). However, their traditional knowledge could incentivize the sustainable practices, and contribute to local adaptation and climate change. Under such circumstance, MFIs have scope to mobilize their social capital in mitigation and adaptation to local climate change in poor communities in Bangladesh.

Social capital and knowledge sharing

Social capital refers to the networks, norms, and trust within a community that facilitate collective action for mutual benefit. Such virtue can help share information among the urban poor communities regarding mitigation and adaptation. For example, poor communities hold traditional knowledge and crafting skills, which can contribute to environmentally favorable economic activities. The MF group can serve as a platform for social relations and community interaction, allowing exchanges of information which is crucial for mitigation and local adaptation to climate change.

The strong social connections within microfinance (MF) groups offer a valuable platform for members to share information, build trust within their community, and engage in collective cooperation. Regular exchanges for credit and saving activities offer an opportunity to exchange information relevant to mitigation and adaptation (e.g. early warning and hazard preparedness). This process is enhanced by mutual trust and reciprocity among the poor, where social capital enforces information flow, crucial for mitigation and adaptation at local level.

The platform also provides a valuable opportunity to combine traditional knowledge with modern techniques, leading to more effective and sustainable economic production. Borrowers can adapt low-cost strategies and innovate collectively, paying due attention to the climate challenge. By promoting cooperation and collective action among the urban poor, social capital not only aids in preserving traditional knowledge but also contribute to mitigation and adaptation to climate change.

Microfinance institutions (MFIs) can play a key role in facilitating climate change mitigation and local adaptation by leveraging the social capital of urban poor communities. Through MF platform, the urban poor communities—often consisting of neighbors, community leaders, and others with shared socio-economic experiences—can share knowledge of climate adaptation practices and resilient economic activities. Such platforms allow for the transmission of intergenerational and contemporary knowledge.

Conclusion

Microfinance institutions (MFIs) possess a unique and powerful tool for combating the localized challenges of climate change: the social capital of their borrowers.  While MFIs rightly prioritize poverty reduction, they can and should simultaneously leverage this inherent social capital to address the growing threat of climate change.  It’s not about detracting from poverty reduction efforts, but rather recognizing and mobilizing the existing social networks and community cohesion to build climate resilience.