Promoting Inclusive Markets and Financial Systems
Do Financial Services Build Disaster Resilience? - Examining the Determinents of Recovery from Typhoon Yolanda in the Philippines
In November 2013, the Philippines was devastated by Typhoon Yolanda. In response, Mercy Corps initiated programming aimed at speeding affected households’ economic recovery and promoting their resilience to future natural disasters. The interventions were designed with the assumption that access to formal nancial products, such as savings accounts, as well as the provision of cash assistance would increase households’ resilience to future shocks. This study analyzed survey data from households in Western Leyte, Philippines to test this and other common assumptions regarding what characteristics contribute to disaster resilience. Speci cally, it tests the extent to which formal nancial products, diversity of income sources, social capital, and other sources of support are linked to households’ recovery from effects of the typhoon and their perceived ability to cope with similar disasters in the future.
The analysis found that use of savings among households is positively associated with greater recovery from Yolanda, while both savings and loans are positively related to families’ perceived ability to manage future shocks. The results suggest that informal nancial tools are as effective as formal ones in supporting disaster resilience. Both informal assistance from neighbors and formal government aid both are also positively linked to households’ recovery. Livelihood diversi cation is not shown to be linked to greater resilience or recovery, but this may re ect that diversi cation often occurs due to economic necessity rather than as intentional risk management in preparation for disasters. The ndings shed new light on the potential effectiveness of increasing access to formal nancial services, supporting livelihood diversi cation, and enhancing bonding social capital in contributing to household-level resilience to natural disasters.