Includes bibliographical references (p. 75-82).

Introduction -- Literature review -- Methodology -- Results and discussions -- Conclusion and policy recommendations.

"The frequency and severity of droughts and floods harzards are projected to increase with climate change. Households are affected through various mechanisms including income and asset losses that translate to other undesirable socio-economic outcomes such as poor health, reduced human capital development and increased poverty. These socio-economic impacts pose threats to the realisation of development goals including those anchored in the Kenya Vision 2030, the Big Four Agenda of the Kenyan government and the Sustainable Development Goals (SDGs) commitments. Insights on how households cope with and build resilience to the impacts of droughts and floods are important policy imperatives. While there is a range of coping mechanisms that includes informal measures such as dependence on social networks and market-based measures such as the use of formal financial instruments, the former is generally shown to be less effective du to covariate and recurrent nature of climate change inducd hazards. Despite such limitations, there are concerns Kenya households largely depend on non-market informal coping mechanisms, which if left unaddressed will likely result to significant socio-economic costs. The aims of this study were to draw lessons from review of selected interventions and establish how households cop with the impacts of droughts and floods, focusing on various typology including finance coping mechanisms and non-finance coping mechanisms that are further disaggregated into formal coping measures. The study also aimed at establishing factors that support household resilience to the impacts of droughts and floods, focusing on the roles of finance and non-finance coping mechanisms and access to climate information.

In achieving the intended objectives, the study employed review of institutional framework related to the subject, review of literature to draw lessons from existing interventions and analyses of secondary and primary household survey data. Descriptive analyses of a national-wide cross-sectional secondary data of the 2015/2016 Kenya Integrated Household Budget Survey (KIHBS) and in-depth descriptive and econometric analyses of a cross-sectional primary household survey data collected by the Kenya Institute for Public Policy Research and Analysis (KIPPRA) in early 2018, covering 27 Kenyan counties that are prone to droughts and floods were used to provide deeper insights. Bivariate Probit and univariate Probit regressions were used to analyse factors determining coping mechanisms and household resilience, respectively.

The review of institutional framework shows existence of multiple institutions and policies aimed at climate change adaptations and building resilience to the impacts of climate-induced risks. The existance of multiple institutions calls for effective coordination to leverage on synergy. Further, linking customary/traditional coping institutions with formal institutional arrangements seems to have positive results. Review of existing interventions reveal designing and deepening of market-based coping mechanisms require partnerships among the financial institutions, research institutions, development partners and the government. The analyses of the secondary and primary survey data suggets household to use multiple coping mechanisms including finance and non-finance coping measures. Use of market-based coping mechanisms, especially financial instruments such as credit and insurance are found to be low. Key challenges hindering use of financial instruments are found to include low and variable household income; financial illiteracy; high cost of credit and insurance premiums; and slow response of financial institutions to adapt products to the dynamics of droughts and floods. Urban households and non-ASAL households tend to relatively use formal coping mechanisms while rural and ASAL households tend to rely on informal coping mechanisms. The regression results show that the use of finance and non-finance tend to be complementary; while use of formal finance and informal finance coping mechanisms tend to be substitutes. The findings also suggest that access to climate information through modern media tend to foster household resilience. Additionally, household resilience is affected by various factors including socio-economic characteristics geographic and agro-climate factors. Urban households, higher household income and use of formal savings seems to improve household resilience. The main conclusions from this study are that building household coping mechanisms and resilience in mitigating the impacts of climate change include risk need to be part of the larger private sector development market development, technology development, access to climate information systems and effective coordination framework. Deepening household use of financial instruments for coping with droughts and floods call for overcoming demand and supply barriers.

This study provides impetus for future empirical work and related initiatives that can provide further policy insights. Key considerations for future work include being longitudinal data on household coping mechanisms and resilience, deeper insights on constraints to use of finance coping mechanisms and use of composite indicators for household resilience.