Because microfinance banks operate in sectors heavily exposed to environmental shocks, central banks require MFIs to conduct Climate Risk Stress Testing to protect portfolio stability.
The Climate Shock Analysis Pipeline
[Define Drought/Flood Scenario] 
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[Apply Shock parameters to MFI Portfolios] ---> Simulates crop failures and sudden default spikes
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[Compute Portfolio-at-Risk (PAR_30) Levels] --> Forecasts capital erosion and liquidity drops
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[Enforce Contingency Funding Requirements] ----> Restructures liability position
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