Creditor Decisions and Climate Change

The paper provides evidence on how credit decisions are adjusted in response to climate shocks. Using data on rainfall shocks in Uganda, the following findings arise: (i) while creditors respond to climate shocks by adjusting their risk assessments and reducing credit provision, debtors on the other hand face exclusion from credit markets, (ii) significant disparities in the demand and supply of credit across sectors in the event of climate shocks. (iii) multi hazard environments such as coexistence of climate shocks along covid 19 shocks, amplify credit constraints though disproportionately among debtors and creditors. (iv) when multiple shocks occur in succession, the behavior of credit markets is rather influenced by the cumulative impact of the shocks.