Understanding MSME Resilience to Climate Change: The Impact of Flooding
Flooding in Nigeria. Photo courtesy of Associated Press — via NYT

“When it floods here, expect anything.”

Philomena, middle-aged female food vendor, urban area, Kenya

Understanding the impact of climate change on small businesses is critical to the success of the startups and innovators serving them.

For micro-retailers in Nigeria and Kenya, flooding and drought are cited as the most significant and catastrophic weather events that impact their businesses.

However, as revealed in our new research, the ways in which these two weather events impacted their businesses, incomes, and communities was different. In this article, we articulate the specific impacts of flooding on the MSMEs we surveyed, laying the groundwork for innovative products and services that can improve their resilience (outlined in article 4 of this series).

“There was a time we had floods — I have been affected twice. Goods were carried by the floods. I was almost sued because I didn’t want to pay for lost stock. I had bought it on credit and before paying, it was spoiled by the flooding.


Another time, my shop flooded and carried away my utensils and stock right from the shop. But there was nothing I could do. One has to be tough and able to stomach the losses.”
Philomena, middle-aged female food vendor, urban area, Kenya

Nearly half of the micro-retailers we interviewed — 47% of MSMEs — were impacted by flooding.

Flooding was the most common weather event to impact small businesses across both Kenya and Nigeria. Urban and peri-urban MSMEs reported being impacted most severely or most frequently by flooding in comparison to rural MSMEs, which were primarily impacted by drought.

The Impacts of Flooding
The primary impacts of flooding on micro-retailers were a myriad of short-term impacts on their shops, inventories, and supply chains.

Many described how flooding had physically damaged their store, forced them to close their shop, and required them to use savings or predatory loan products to repair and rebuild.


Some small businesses also mentioned that they couldn’t open their shops during periods of intense rainfall and flooding, because they couldn’t physically reach their shops, and that their customers may have been unable or unwilling to travel to reach the shop as well.

“There is erosion where I live so my supplier can’t come when it is flooding. They have to come the next day. I started ordering smaller quantities to try and make sales, but even the small quantities are not selling. Customers are even buying less or they can’t get to the shop in the rain, so there is nothing to do but wait for when it is dry.”
Chioma, middle-aged female shop owner selling leather and Unilever products, urban area, Nigeria

Logistics and supply infrastructure issues were another common impact. Many MSMEs described delayed supply deliveries during times of flooding, as delivery trucks were unable to access parts of a city or rural areas due to poor road conditions. Many shop owners were concerned about losing customer loyalty if they ran out of stock, as customers would have to purchase their goods from a new shop, and some may never return.

Micro-retailers also reported that many goods could be damaged during delivery during periods of flooding. For example, fast moving consumer goods (FMCG) product packaging got harmed or broken when they got wet. Goods themselves were damaged in the shop if they got wet or if there were severe power outages that spoil refrigerated or frozen items. Small businesses were either unable to sell these products, or forced to sell them at a reduced price — often far below what they purchased them for.

“I deal with cartons. When it rains, trucks cannot come because of the bad roads so the cartons get rained on and some products are spoiled. So the value of the products drops — instead of selling for $USD1.15 I sell for around $USD0.5, which is below the price I bought it for. The cartons get wet and dirty but I have to pay the same price, but I cannot sell to my customers at the same price. They won’t buy at the same price if it is spoiled. That is the risk of the business.”
Ida, middle-aged female shop owner selling consumer goods, urban area, Nigeria

A secondary impact of flooding — one that seems to be a less significant impact — is the increase in the price of goods (due to flooding damaging crops), and the reduced income of customers that work in farming or other sectors impacted by flooding. Micro-retailers described customers in this situation as needing to reduce their consumption to match their income and their ability to afford the increased price of goods. In many cases, these customers would request to buy goods on credit — credit that is most often informally offered directly by the shop owner, deferring their cash flow days, weeks, or months into the future.

Recovery from Flooding
In comparison to drought, micro-retailers were able to recover more quickly from the challenges associated with flooding.

Of those impacted by flooding, 63% said that they have fully recovered from the flooding event described to us, however the remaining 37% have still not recovered to pre-flood levels of income or customer footfall. Just over 42% of MSMEs interviewed were able to recover from the flooding event after one month, but almost one-third took up to one year to recover.

Micro-retailers’ primary concern in recovering after flooding was meeting the basic needs of their families, and then acquiring new stock for their store. The biggest constraint to stock acquisition was lack of capital or access to appropriate financing to do so.

Micro-retailers in Nigeria and Kenya relied on both savings and loan products while recovering from the effects of flooding. In the immediate aftermath of a disaster, when income was reduced, savings were primarily used to cover basic needs. Credit was used to support business expenses such as restocking and rebuilding. However, many micro-retailers mentioned that available loan or buy-now-pay-later products weren’t right-fit for these circumstances, with repayment periods that are too short and interest rates that are too high in the case of credit. Many small businesses said they don’t take loans because of lack of trust or a negative previous experience, instead relying on savings to restock. Additionally, because of inflexible repayment terms, many micro-retailers were unwilling to take loans for goods during the rainy season, for fear that these goods would be spoiled or damaged by the rains and leave them unable to pay back the loan.

Meet Mary, a 22-year-old female retailer in an urban area of Kenya

“It is the rainy season, so everything is wet and cloudy. Heavy rain destroyed my shop and stock before. I didn’t know it would be so heavy. The water spoiled my products and part of my shop. It is also difficult for suppliers to bring in stock because of the rain so they delay my delivery.”

Mary is a retailer in Nairobi’s Industrial Area. In March of 2021, she was hit by a flood she feels she has still not recovered from. She lost rice, sugar, and ten bales of flour during the flood. This stock was worth more than $USD250 — a large sum given that on average she sells $USD165 worth of stock per month.

During the period immediately following the flood, she used her savings on necessities like food and rent for her house. She considered taking out a loan to help her restock, but she doesn’t like taking out loans because of the high interest rates charged. She also thinks the repayment periods are too short.

Due to her inability to finance stock purchases and unwillingness to take out a loan, she has to reduce her stock order. A reduction in stock order quantity limits her future revenue and ability to continue rebuilding and recovering from the flood.

Some of the MSMEs interviewed experienced physical damages to their shops. Most of them used savings or loan products to make repairs, and many expressed an interest in not only rebuilding but fortifying their shops to be able to better withstand future extreme weather shocks. A few retailers we spoke with had invested in their shop to protect against future flooding — such as building stronger walls or adding shelves on the walls to store goods. However, many had trouble finding sufficient information on what types of modifications they should make to better adapt to future flooding events, and also lacked appropriate financial products to finance these projects.

“Every December, I try to make sure everything is in order. At the beginning of this year, I renovated the roof of my shop where it was leaking, and the floor tiles so no one fell. I changed the gate, because the old one was rotting, and I even painted the shop. I also changed the shelves and the electrical wiring. I have no regrets — the investment is paying off. This wasn’t my first time renovating my shop, but it was the biggest one. People now know they will be comfortable in my shop and come more often.”
Ida, middle-aged female shop owner selling consumer goods, urban area, Nigeria

Adjusting future stocking patterns in the long run was also cited as a common method of recovery. Many of the small businesses we interviewed had started stocking more non-perishable goods. Their goal is to guarantee that they will have stock availability during the next period of flooding, so they can maintain some of their income and customer loyalty.

Rasheedat is a small business owner in Nigeria. Photo courtesy of Mercy Corps.
Meet Adela, a retailer in urban Nigeria
“There is nothing much I can do to prepare if it is raining. I close my shop. I used to pack everything on the floor, but I can’t do that anymore because of the heavy rains and floods. My house is not very far from the shop, so I now take my goods, like soap, from my shop to my home every day and sell them to people from my home.”

Adela owns a shop in Nigeria. Once, her shop flooded and destroyed many of her goods and products. Ever since, she has taken a number of actions to avoid the same setback. She says that she cannot predict the floods, but she does her best to prepare just in case.


First, she has started changing her stocking patterns — she now stocks different products depending on the prevailing weather conditions. For example, she waits to stock any products that could spoil if they get wet, such as goods with paper or cardboard packaging, until it is drier.


Second, during rainy periods, she ferries her stock back and forth between her home and shop every night and morning, because her home is more flood-resistant. She doesn’t trust weather reports, so she feels most secure by bringing her products home with her in the evening.

Flooding in Nigeria. Photo courtesy of Afolabi Sotunde/Reuters — via NYT
Opportunities for Resilience

Floods have many short and long-term impacts on MSMEs, their families, and the communities they serve. 


Floods seem to primarily impact urban areas — important to note as increasing urbanization will lead to a greater number of people and micro-retailers impacted by flooding in years to come.


For the micro-retailers we interviewed, the result of the impacts of flooding meant reduced income, an increase in predatory loans, and reduced savings. In some cases, micro-retailers had to decrease their spending on family and household items, such as rent, food, fuel, or electricity, due to their reduced income and savings. They were also unable to fully stock and provide for their customers, limiting critical food and supplies in the last-mile communities that they serve.

Tools, products, and services that offer short-term relief in the aftermath of a flood are likely to be the most impactful in increasing the resilience of micro-retailers and their communities. Savings products to better prepare for immediate personal and family spending could be beneficial in the post-flooding context. Right-fit loan products, with appropriate interest rates and repayment periods, could be an extremely useful tool for MSMEs after flooding to enable them to restock, rebuild their income, draw less on their savings, and begin providing critical products to their communities. Loan products bundled with information services specifically targeted at adaptation strategies — such as shop fortification and adjusting stocking patterns — can also be an important tool in maintaining a micro-retailers ability to deliver supplies in the last mile in the aftermath of a flood.


Overview series


The Impact of Drought