The goal of this work is to reduce climate risk in rural communities through improved insurance related contracts. The objectives can be summarized:
|Fig. 1 By indexing payouts to measured precipitation, index insurance helps protect farmers from climate risks in Malawi. It enables access to microcredit allowing them to effectively use climate information in agricultural production. |
- To improve knowledge of properties of contracts as related to rural communities, including the expected changes in decision-making at the rural community level and expected enhanced outcomes.
- To improve robustness and effectiveness of index insurance and related contracts.
- To provide an assessment of methods and modalities for wider implementation of the risk reducing contracts.
|Fig. 2 Building upon the weather index insurance insurance-micro loan bundle for cash crop groundnuts (left), farmers in Malawi (right) will soon have access to insurance and loan financing to allow improved access to inputs for subsistence crops, such as Maize (center).|
The Commodity Risk Management Group (CRMG) at the World Bank has been piloting index-based weather insurance for developing country producers, agricultural businesses, and banks. The CRMG has been working in a number of countries around the world to pilot this approach, including India, Peru, Ukraine, and Ethiopia among others. Most recently CRMG worked with local stakeholders in Malawi to pilot index-based weather insurance for the 2005/2006 crop season in order to enhance groundnut farmers ability to manage drought risk and in turn access credit.
We are now working with CRMG in Malawi to refine contracts, extend contracts to other crops, and consider opportunities for scaling up the initiative.