Integrating climate risk financing into village banking in rural PakistanIntegrating climate risk financing into village banking in rural Pakistan
In the flood-prone district of Charsadda in Khyber Pakhtunkhwa (KP), climate change continues to disrupt lives, particularly those of women and smallholder farmers. Rising temperatures, erratic rainfall, and extreme weather events frequently compromise livelihoods. In these vulnerable settings, women are often the most affected, yet the least equipped with the financial resources needed to recover and adapt.
Village Banks: Community-Led Financial Safety Nets
Supported by the German development cooperation, our implementing partner the Sarhad Rural Support Programme (SRSP) is implementing the Strengthening Climate Adaptation and Risk Financing project and has introduced an innovative solution: integrating climate risk financing into the existing Village Banking Model. This approach enables vulnerable communities, especially women, to take control of their financial futures and prepare for climate-induced disasters.
Historically, women and small-scale farmers in remote areas have had little or no access to formal financial services. SRSP’s intervention has addressed this gap by establishing eight new village banks in the district, each managing PKR 2 million through a revolving loan fund. Thanks to interest-free loans ranging from PKR 40,000 to 50,000, women have launched home-based businesses, improved household resilience, and gained financial autonomy.
“I came to know about the village bank and took a loan of 50,000 rupees. I added some of my savings to it and started a small business. Now I’m able to earn well and manage my life much better,” shared Naima Bibi, a local entrepreneur.
Climate-Smart Skills for Sustainable Livelihoods
Financial access alone is not enough. That is why the project also equips women with technical training in climate-smart agriculture, enabling them to establish nurseries and engage in sustainable seed production.
“We used to think only men could do this work,” said Shamim Bibi, who now runs a nursery. “Now women have become much stronger and more capable.”
These nursery owners are producing and selling high-quality seedlings which is boosting their household incomes while contributing to local biodiversity and climate resilience.
Alternative Livelihoods for Climate Resilience
When floods struck the village of Aagra Payan in 2024, the impact was devastating. The dedicated Contingency Fund, established within the village banking system, provided immediate relief, demonstrating the effectiveness of community-led disaster risk financing. However, since the community relies heavily on agriculture, it suffered significant crop losses and economic setbacks. The disaster exposed a harsh reality: dependence on agriculture alone leaves communities highly vulnerable to the effects of climate change.
In response, the project went beyond providing immediate relief. It offered affected women vocational training in embroidery, sewing, and small business management equipping them with alternative income sources that are not weather-dependent.
“We sold items worth PKR 200,000 in the first batch,” said Shazia Sami, a tailoring trainee. “Now we’re working on an order worth PKR 150,000. We are earning and supporting our families alongside our husbands.”
These home-based enterprises are helping families diversify their income, recover more quickly, and build long-term resilience—reducing their dependence on external aid.
Watch the video below to hear directly from the women driving change.