Quantifying Capacity-Commitment Gap: Household Willingness to Pay and Blended Finance for Climate Adaptation in Bangladesh's Char Regions

Sustainable climate adaptation in Bangladesh's highly vulnerable char regions is critically constrained by a financing gap between household commitment and financial capacity. This study diagnoses this “capacity-commitment gap” and proposes a novel blended finance solution. Applying the Contingent Valuation Method to 400 households in Bangladesh’s climate-vulnerable char regions, we employ Probit and Tobit models to analyze Willingness to Pay (WTP). We find strong motivation (65% WTP) but severely constrained capacity, with 90% of contributions capped at ≤400 BDT/month. Econometric analysis reveals that human capital (education) and experiential learning (disaster experience) are more powerful drivers of WTP than income alone, while a paradox of low institutional trust correlates with higher stated contributions—indicating fatalistic self-reliance. Crucially, stated WTP amounts reflect a strict affordability ceiling, not marginal valuation, invalidating user-pays models. We translate this diagnostic evidence into an innovative financial architecture: a Char Resilience Bond. This instrument securitizes the aggregate value of formalized in-kind community co-investment (labor, local knowledge) to credit-enhance and leverage external capital. Our study provides an actionable blueprint for transforming demonstrated local need into bankable adaptation investments, advancing the literature on financing public goods in subsistence economies.