The Role of Financial Services in Building Household Resilience in Burkina Faso

The most common shocks faced by households, in descending order, were illness/injury, death of family members, livestock loss, and poor harvest. Households primarily relied on savings held at home, reduced their food consumption, and sold grain and livestock to cope with these shocks. The preferred coping mechanisms were different from the ones frequently used: selling small livestock ranked as first, followed by borrowing from a savings group, reducing food consumption, using savings, borrowing from family and friends, and selling grain. Purchasing on credit was not a preferred method for coping with any of the shocks. The two most important factors that determined whether a mechanism was used to cope with shocks were its availability and timeliness. Informal financial services played a larger role than formal services in helping households cope with shocks. Financial services can play a significant role in helping households build resilience in Burkina Faso. However, the demand for financial services to anticipate and cope with shocks appears widely unmet. To address this, financial service providers should design products and services that provide vulnerable households with more viable options. This can be achieved by incorporating features that matter most for coping with shocks, such as timeliness of payout and availability of the product. Additionally, financial service providers should develop products that help households increase their savings, as savings was the preferred coping mechanism for this population.