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Tapping women’s habit of saving to manage climate induced risks through innovative chit fund-cum microinsurance scheme.




The vulnerable urban poor communities are unable to build their resilience capacities against climate change due to lack of resources, knowledge and skills. Paris Agreement and Sendai Framework for DRR recognized risk insurance and climate risk pooling as critical tools to help societies overcome the burden of loss and damage. Market-based insurance is unaffordable for poor communities. Thus, there is a need for an insurance product which is economical, reliable and flexible for the urban poor to subscribe. 

Poor women in slums have a well-formed habit of small savings through chit funds for contingency to repay loans, access healthcare services, repairing homes, fund children’s education etc. It is a traditional and informal method wherein a contribution is made (weekly or monthly) and subscribers bid for the fund through the fund term. It aids population excluded from formal financial systems. Women are well versed with chit funds and it is a popular means of saving.

Taking advantage of this, a chit fund will be devised in which a small percent of the contribution will be accounted as a premium for microinsurance. A matching amount for the insurance premium will come from a community fund bequeathed through this project grant.

Women benefit because their savings habit leads to access insurance enabling them to doubly manage climate risks. The uptake for women-led community based risk management should increase and lead to behaviour change in terms of investing in minimizing climate risks. 

A multipurpose index based microinsurance will be designed through a participatory process to meet the needs of the poor. Women leaders called ‘vikasini’ from the community-based organization will manage and implement the scheme.

The aim is to build capacities of slum communities, particularly women, to better understand climate risks so that they plan and make investments with strong consideration for the future, to improve their standards of living and resilience.

What actions do you propose?

MHT works with poor women in urban slums around habitat issues.  It collectivises women and facilitates articulation of their needs better. It is working in three countries in the South Asia region to build climate resilience of the poor.  Through the project ‘Women’s Action towards Climate Resilience for Urban Poor in South Asia’ it has successfully implemented actions pertaining to information, institutional and technological aspects for building resilience of poor communities against climate stressors like heat waves, flooding and inundation, water scarcity and increased climate change related incidence of water and vector-borne diseases. There has been an emphasis on ex-ante preventive or risk mitigation measures. The proposed project aims to integrate finance as the fourth crucial aspect to prepare for future climate risks. Thus, consideration will be given to risk coping/protective measures for recovery and risk reduction/promotive measures for long-term adaptation which is a valuable addition to existing efforts. 




  1. Design a chit-fund cum microinsurance product with payment of premium based on contribution from subscribers and interest accrued from corpus. It will operate like a traditional chit fund with members entitled to index based microinsurance along with savings and credit benefits.

We aim to develop an index based microinsurance scheme considering the two extreme weather events - heatwaves and floods through following steps:

  • Establish an advisory group comprising of experts from the field of public health, gender, economics, meteorology, risk management and microinsurance, microfinance, climate change, local government representative and vikasinis (women leaders from the community). This group will provide guidance, support in conducting required studies and validate development of indicators for the microinsurance scheme.    
  • Gather environmental and socio-economic data and information through literature review, from relevant institutions and government bodies and by conducting surveys and interviewing professionals.
  • Understand the impact of existing adaptation measures and its reach to vulnerable communities, possible interventions required and how this proposed microinsurance scheme will add value to the existing initiatives through interviews and surveys.
  • Correlate and analyse the environmental and socio-economic data to identify indicators and trigger point for the index based microinsurance scheme with the help of experts. The indicators that will be considered are temperature for extreme heat and rainfall and water level measurements for flood.   
  • The savings cum index based microinsurance scheme with all details will be developed by an insurance expert in consultation with women from slums.  

 Risks that will be covered by the proposed scheme include: 

  • Economic loss or damage due to flood and the cover will be for house, community infrastructure, identity card, food grains

*Poor communities in slums usually follow the practice of filling the stock of food grains when prices are low or when they have sufficient money to buy. There have been instances when food grains went bad due to moisture and seepage during heavy rains and floods. Thus, they incur economic loss as well as face hunger in absence of in time relief response.

*We propose to cover the community infrastructure in this scheme by keeping aside 5 percent from the total fund gathered from the microinsurance premium collected. This amount released can be used in combination with funds (currently available) collected by CBOs from the community to manage community infrastructure.    

  • Healthcare cost due to heat stress and vector borne diseases
  • Loss of work days or loss of productivity due to extreme temperature and flood/waterlogging situation

These will be community specific (professions, income, assets, health, and location) and based on loss and damage experiences. Some of the data that will be collected during surveys are temperature, rainfall and water level measurements, mortality rate in summer and monsoon, reasons for fatalities, healthcare cost, occupation and loss of work days.

Identifying vulnerabilities and impacts of the extreme weather events in Ahmedabad and Surat, the local governments have introduced the Ahmedabad Heat Action Plan since 2013 and the Surat Resilience Strategy since 2017. Ahmedabad has also the Pre-Monsoon Action Plan. The early warning system such as high temperature alert, flood alert messages on mobile phone, public education campaign and communication have been used as a part of these initiatives. MHT through its project ‘Women’s Action towards Climate Resilience for Urban Poor in South Asia’ has developed a prototype of a low-cost flood alarm system in addition to other adaptation measures that are implemented. The microinsurance scheme compliments the existing efforts.  

The proposed initiative can bank on existing early warning systems and benefit from availability of information required to monitor index and outreach to citizens conducted by authorities to minimize impacts. For example in case of Ahmedabad, forecast of rise in temperature is available which can be monitored and heat alert is communicated to population using different mode of communication. Thus, this increases preparedness of citizens to cope with impacts of these weather events and reduces the chances of individuals getting affected. This promotes risk mitigation by taking advance measures. Though there remain residual risks which to some extent this proposed microinsurance will address.

In order to sustain the microinsurance fund/corpus on which the financial viability of this model depends (i.e. interest money gained on this fund is used to subsidize the cost of microinsurance offered to women from slums), the number of pay-outs will be limited depending upon the amount collected from the microinsurance premium. This pilot program is an effort to provide some relief to the vulnerable section of the society. It is at least a beginning in the direction to consider the humongous task of addressing loss and damage issues in urban areas.      

Operation of the chit fund and insurance will be with ‘viskasinis’ with MHT in facilitator’s role. Trust among community members and long term association of MHT with communities makes this model safe and encourage members to subscribe the product. Saving as a habit will be used to increase uptake of microinsurance for managing climate risks. The ratio of payment of the premium by women and the subsidy amount and number of pay outs will be decided based on the survey results and in consultation with women. Following evaluation results of this program in the third year, the available microinsurance fund will be rolled to the next phase of the implementation of this program after making required adjustments.

MHT has worked as the government designated damage assessment agency for the flood and earthquake relief response. Thus, it has the experience of designing the damage assessment tool, conducting the assessment and facilitating the distribution of relief material as a part of government’s response. There is a long standing association of MHT with the local city government. Thus, the existing partnerships will help to leverage on the government declared compensation and corporate social responsibility funds received from companies/private sector enabling to reduce the burden of pay outs for microinsurance.

2. Capacity building of selected women from the community based organizations to manage and implement the scheme

3. Workshops and awareness raising sessions for community members on financial literacy and climate change risk management which will support implementation of existing community based resilience action plan.

4. Technologies and practices that reduce the climate risks will be integrated into the implementation.

5. The slum communities as a part of the other project have already developed a Community Based Resilience Action Plan based on Community Based Vulnerability Assessment Toolkit developed. Thus, the proposed financial mechanism with an option of provision of credit will be a means to encourage households to invest in implementation of identified priority adaptation actions. 

6. Interface with local governments in investing in climate resilience measures.


Who will take these actions?

Mahila Housing Trust’s (MHT) long term association with communities, a structure already exists which is led by women from communities drives the process of implementation of programmes and projects. 200-250 households in slums are organized as Community Based Organizations (CBO). Selected women leaders called ‘Vikasinis’ from CBOs for Community Action groups and liaision with local government for community’s access to basic services.  

MHT has knowledge, expertise, skills and experience related to climate change adaptation and microfinance. The recent engagements in these areas of expertise are through a project ‘Women’s Action towards Climate Resilience for Urban Poor in South Asia’ and facilitating two Credit Cooperatives with more than 10,000 members with a turnover of 5.7 million USD or 4.6 million Euros. Thus, these experiences serve as a foundation for to leap forward to design innovative financial instrument enhancing resilience of poor communities by providing social protection.


Roles and responsibilities

  1. Women leaders ‘Vikasinis’ from slums in designing and running the scheme
  2. MHT in the role of facilitator will provide external support in designing, capacity building and implementing the scheme, access funds and will play a role in decision making
  3. CBO in operationalizing the scheme, access funds and will play a role in decision making
  4. Microinsurance expert in providing necessary guidance, sharing knowledge and building skills to design and run the scheme and manage claims

Where will these actions be taken?

One slum each in Ahmedabad (more prone to extreme heat) and Surat (more prone to floods) in India. The proposed actions of this project will contribute to the existing Ahmedabad Heat Action Plan and Surat City Resilience Strategy.

What are other key benefits?

  1. Investing in pre & post impact measures to reduce climate risk.
  2. Increased resilience of slum communities to cope with negative impacts of climate change. 
  3. The proposed model linking savings with social protection efforts help in gradual asset building behaviour strengthening economic viability of communities and eventually increasing access to traditional financial service market.  
  4. Women empowerment facilitates increased uptake in risk management practices.
  5. Enabling communities to escape from the vicious cycle of poverty by availing financial benefits (for healthcare, food etc.) immediately after any climate induced disaster
  6. Access to microinsurance will play catalytic role encouraging women to take interest in climate resilient actions.
  7. Necessary knowledge and skills empower women to devise and invest in risk management strategies. 
  8. The scheme will act as a prototype and inform development of similar financial tools in future.

What are the proposal’s costs?




Time line

The bundling of savings and insurance will be seen as a community/ participation based joint liability risk management strategy which is operational at the community level run by the women leaders from CBOs.

5-15 years: There is an inherent need for community based measures in the absence of market based products willing to serve the urban poor. This experience will help MHT to implement it in 7 other states where MHT is working.

15-50 years:  As a community level instrument it will be effective and corpus contributions will be solicited from local government funds and funds allocated for corporate social responsibility. MHT will work with both banking and non-banking financial institutions will tap the potential of serving the poor through such savings cum insurance models.

50-100 years: Other ongoing development efforts are in place to enhance financial capabilities of poor communities. Thus, in the long run ability of communities may increase to pay for their insurance. In future, it may also be the case that risk insurance for poor is mainstreamed with formal financial services.

Related proposals


Ahmedabad Municipal Corporation. 2018. Ahmedabad Heat Action Plan 2018: Guide to extreme heat planning in Ahmedabad.

Kapoor M., Schoar, A., Rao, P., and Buteau, S. 2011. Chit Funds as an Innovative Access to Finance for Low-income Households. Available at

Mahila Housing Trust. 2015. Women’s Action towards Climate Resilience for Urban Poor in South Asia – Solutions Statement.

Mahila Housing Trust. Women’s Action towards Climate Resilience for Urban Poor in South Asia – Midterm Report.

Mahila Housing Trust. Credit Cooperatives - Internal Notes. 

Mahila Housing SEWA Trust. 2018. Submission to the Executive Committee of the Warsaw International Mechanism for Loss and Damage associated with Climate Change Impacts (Executive Committee) on the type and nature of actions to address loss and damage for which finance may be required.

Sridharan, V. 2012. Enhancing the Impact of Cash Transfer: The Latest Trends toward Savings-Linked Social Protection. Available at

Surat Resilience Strategy. 2017.

The World Bank Group, Rapid Social Response and GFDRR. 2013. Building Resilience to Disaster and Climate Change through Social Protection – Synthesis Note. Available at

UNFCCC. 2015. Paris Agreement. Available at

United Nations. 2015. Sendai Framework for Disaster Risk Reduction 2015-2030. Available at