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When heat hits: Short-run saving and withdrawal behavior among microfinance clients in Benin

Year: 2026
Type: article
Study design: Observational Study
Abstract: Increased access to finance is widely viewed as a key driver to increase adaptive capacity in response to climate change. However, apart from limited studies on borrowing behavior, little is known about how exposure to extreme heat is associated with microfinance clients’ financial behavior. This study addresses this gap by investigating the short-run associations of unusual heat with microfinance clients’ saving and withdrawal behavior. In a case study, it combines geo-located temperature data with a unique dataset of around 50,000 clients of a leading Microfinance Institution (MFI) in Benin. Applying two-way fixed effects, seemingly unrelated regression, and ordinary least squares models, the study finds that exposure to extreme heat is heterogeneously associated with microfinance clients’ financial behavior. Specifically, non-agricultural clients show suggestive evidence of the accumulation of precautionary savings after extreme heat days in the preceding quarter, while extreme heat days are negatively associated with agricultural clients’ savings. Microfinance clients increase their withdrawals when exposed to extreme heat within the preceding quarter, but the association is not robust for agricultural clients’ withdrawals in response to an increase in annual extreme heat days. Addressing the heterogeneous financial responses across different clients to extreme heat consequently requires explicit policy attention. Our findings contribute to a better understanding of the associations between extreme heat and individual economic outcomes, how financial behavior relates to weather risk, and how microfinance clients respond to shocks.
DOI: 10.1016/j.worlddev.2026.107578
Language: English
Open Access status: hybrid
Estimated APC paid: $5,895
OpenAlex ID: W7168099672
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