CGAP’s take on household resilience in Burkina Faso

Marie and Child

“A resilient household is able to find solutions to the various crises it encounters by making good choices in their income-generating activities. A non-resilient home fails to solve crises encountered.” — Marie, a 35-year old first wife of a polygamous family who lives in the Passoré province of Burkina Faso

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>>Authored by Barakah Ibisomi, Microcredit Summit Campaign Program Intern

Landlocked Burkina Faso is one of the poorest countries in the world with 44.6 percent of its population living on $1.25 or less per day. A recent CGAP publication draws on “resilience diaries” of 46 women in rural households in the northeastern zones of the country to determine how different financial services contribute to and affect household resilience.

Twenty-five women are members of village banks with the Reseau des Caisses Populaires du Burkina Faso (RCPB) while 21 are members of savings groups with the Office de Développement des Eglises Evangéliques (ODE). The seven-month project was conducted by Freedom from Hunger.

The diaries were used to understand the following:

  1. The strategies poor households employ to manage economic, environmental and health shocks that disrupt their financial lives.
  2. The roles formal, non formal and informal financial products play in improving household resiliency and building assets.

Freedom from Hunger Resilience Framework

Burkinabé households are highly influenced by their country’s seasonal and agricultural calendar as it determines how they make a living — specifically, how land is put to use, the degree to which households depend on livestock, and other non-agricultural sources of income. The time just before harvest in September is financially difficult, with income and savings at a low point and borrowing and expenses at a high point. There is a need for additional or specialized financial services to help households better manage the season.

The most common coping strategies used to respond to shocks are first using savings at home, then reducing food consumption, selling grain, selling small livestock, purchasing on credit and lastly, borrowing from a savings group. Borrowing from financial institutions, family and friends is less preferred. As resources become available to them, the women re-prioritize the way they manage any particular shock. For example, after harvest, more sell grain and fewer reduce food consumption, make purchases on credit or borrow from friends and family.

Very few households in Burkina Faso have access to formal financial services so the women’s use of formal financial products is very limited and their demand for it is widely unmet. When asked whether they had all the financial products and services they need, only 17 percent felt they had. There is a strong demand for additional financial products and services, with an emphasis on microcredit, savings products and agricultural-related grants. However, when they do have access, they use formal services to cover costs incurred from shocks. The most common formal products or services used are RCPB loans and remittance services.

The more commonly used non formal services are savings groups which are used to save money for purchasing livestock, paying health expenses, school fees and for food and income generating activity (IGA) expenses. For informal services, the women borrow from friends and family, make purchases on credit from local merchants and, as mentioned earlier, receive remittances often by hand-to-hand transporters. The women reported using non formal and informal financial services significantly more than formal financial services.

All these services help improve cash flow but it is difficult to determine the extent to which they are helpful in building resiliency.

Other key findings from the studied households:

  1. The most common shocks encountered by those studied were illness and injury, loss of livestock, death of family members and poor harvest, all These shocks affected both income-generation as well as food supplies. Other semi-regular shocks included droughts and famine, political crisis, and health threats.
  2. Women play a significant role in the household economy, but are limited byResilience Quote gender norms, time, and resources to pursue more profitable IGAs. The most common IGAs for the participants were the growth and sale of cash crops and petty commerce.
  3. Food insecurity dominates all of the households’ lives.

The concept of resilience is in itself a work-in-progress because of its novelty and multi dimensionality. The RM-TWG defines resilience as “the capacity that ensures adverse stressors and shocks do not have long-lasting adverse development consequences.”

Based on this definition of resilience, it is difficult to consider many of these households resilient because when shocks occur, they use negative coping mechanisms that increase food insecurity, such as reducing daily food consumption and selling grain stocks and livestock meant to be. These strategies solve an immediate problem but can have long-term, long-lasting adverse development consequences.


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The Puzzle of Poverty: Embera Puru Edition

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>>Authored by Kristin Smith, Program Intern for the 100 Million Project

jjjjJust a few weeks before joining the Microcredit Summit Campaign team, I traveled with Global Brigades to teach financial literacy workshops and provide microenterprise consulting to small business owners in an indigenous community in Panama.

The program, founded in 2003, sends university students from the United States and select European countries on a series of brigades to Panama, Honduras, Nicaragua, and Ghana to “strengthen the health and economic development of communities” by meeting a certain aspect of their “holistic model.” Learn more.

Their holistic model attempts to assess and address the most dire needs of developing communities in an intentionally sequenced process to help them achieve a state of sustainable self-sufficiency.

Panama holistic model

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Under the holistic model developed specifically for Panama, the process begins with Global Brigades employees researching the region and evaluating the community through a process of “integrated community development” to understand its most pressing needs.

Initially, the program sends medical and dental brigades — passionate volunteers working to mobilize positive social change — to the communities to provide mobile medical and dental clinics. Community banks are then established by a group of community members with guidance from Global Brigades staff to encourage saving for health needs and emergencies. Once established, the community banks begin distributing loans to community members for environmental projects and new business developments.

My brigade, composed of my colleagues from the University of California-Berkeley and others from Arizona State University, was excited to complete the Global Brigades puzzle (that is, the holistic model). Our role was to teach financial literacy and perform business consultations in the community of Embera Puru.

Embera Puru is an indigenous community of some 250 individuals in the Darien Province. Located in Eastern Panama near the Colombian border. Embera Puru is an Embera community, one of the largest indigenous groups in Panama and Colombia. The community members’ main source of income is agriculture, producing crops such as plantains, yucca, rice, and otoe (a local root vegetable), and creating artisan handicrafts.

With guidance from Global Brigades, the community established a caja rural (community bank) to encourage savings and loan making within the community. Embera Peru’s caja now has 21 members with 21 active savings accounts, but there are still many among the 266 inhabitants without this means to save.

Comparable to a savings group, a caja rural is a group of men and women who pool their funds to create a solid financial base, providing savings and loan services for themselves and for the entire community. Despite the initial contributions of Global Brigades, the caja is entirely owned and operated by members of the community.

Because the indigenous communities of Panama are predominantly closed economies, community groups eschew money from the outside and make weekly savings deposits into the community bank to begin their work. Group members manage the fund themselves, make decisions about who can receive loans and under what terms, and hold each other accountable for loan repayment.

As part of our business consultation work, we met with representatives from the community’s “Environmental Committee,” a group of farmers producing beyond self-sufficiency for distribution within the community, to ask simple questions to best understand the level of business assistance they needed.

The president of this group, a man by the name of Marcelino, also happens to be the treasurer of the caja rural, as well as a community teacher. Through conversation with Marcelino, we learned that his bookkeeping records won their bank a prize for “Caja with the best bookkeeping management” at a board of directors microfinance workshop in Panama City.

Analyzing the business’s books and records, we found a very thorough system and were stumped on how else to proceed with our consultation. (Aside from our recommendation that they include an inventory management system in preparation for increased production.) Not long into our conversation with these experienced committee leaders about potential business obstacles, we found ourselves confronted with an irritated committee leader and community elder who expressed his frustration with the focus of our questions and our work.

He argued that the group’s record-keeping strategies were highly insignificant in comparison to the group’s utter lack of inventory. It turns out that there was a community water shortage resulting from a collapsed well and a series of unfinished agricultural projects throughout the farm.

“Money,” he said. “We need your help on the farm, we need more crops, and we need money.” My observation was that the present infrastructure severely lacked sufficient capital to support a self-interacting and self-sustaining community.

As I sit now at my desk here in Washington, D.C., far removed from this man and his community, I face the internal debate of whether our work and efforts in microfinance are indeed meeting the direst needs of these people. My short time in Panama reinforced my understanding that development is a puzzle that we do not always equip ourselves to solve. Regardless of the practicality of the services we were working to provide, if other pieces of the complex puzzle are not fully in place, the outcomes in general are undermined.

Increased financial access serves as the window of opportunity for many entrepreneurs throughout the developing world, but without the proper environment and sufficient infrastructure, access to money is rather trivial.

Prioritizing the views, aspirations, and goals of clients or other program beneficiaries is critical as well. As economist William Easterly often argues, no matter how well-intentioned our efforts, without proper feedback from those receiving the assistance, how are we to measure the effectiveness and progress of our efforts? Under my interpretation, Global Brigades was not responsive to the needs and aspirations of its clients.

While the Embera Puru puzzle remains unsolved because the other pieces were never correctly and fully placed, I am glad to know that the industry and many of its institutions are making great strides towards increased attention to feedback from clients and beneficiaries as well as accountability of institutions to deliver on their objectives. Despite the puzzle’s sheer complexity, we have all the pieces and the ability to work with the poor to solve it.

I encourage Global Brigades to join the Microcredit Summit Campaign in making a specific, measurable, and time-bound Commitment on their efforts to end extreme poverty.

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