PROVIDING small loans to farmers in developing countries who are already struggling with the impact of climate change can significantly improve their livelihoods.

But it can also increase the wealth gap with those who do not receive them, according to new research by Glasgow Caledonian University (GCU).

Microfinance and climate change are two key areas of expertise at GCU and a research project led by Dr Karin Helwig, and co-funded by Opportunity International UK (OI UK) and GCU, focused on the clients of Urwego Bank, OI UK’s partner in Rwanda. The bank provides small loans to farming co-operatives and village savings and loan groups.

Many farmers in the study reported they had been severely impacted by floods and droughts, often losing up to half of their harvest.

They said the loans, which were received in kind as fertilisers or seed, ensured they had at least some harvest, and therefore access to food, even in adverse weather.

The researchers found that small loans were one of the most effective ways for farmers to boost their crops and generate an income for themselves and their families. But there were potential unintended negative consequences.

Helwig said: “Urwego Bank allows the loans it provides to be repaid at harvest time and applies flexibility in the case of failed harvests.