Africa Re, IFC develop index insurance products to increase access to farmers’ financing
Africa Reinsurance Corporation and IFC, a member of the World Bank Group have partnered to support a technical workshop on risk modelling and strategic decision-making for index insurance products.
Most of the agricultural land in Sub-Saharan Africa is rain fed, and many regions are vulnerable to climate shocks such as drought, flooding, and irregular rainfall. To limit their losses in any given year, smallholder farmers often invest very little into their land, which leads to reduced yields and contributes to food insecurity.
Insurance can be a good risk management tool for these smallholder farmers, but the traditional insurance market largely fails to meet their demand for affordable insurance. Index insurance provides an innovative and more efficient solution for these farmers to protect their crops against losses and encourage investment.
James Seward, Practice Manager for the World Bank Group’s Finance and Markets Global Practice, Africa region, said, “The agriculture sector is a critical part of most economies in Africa and protecting farmers and agribusinesses from weather-related risks is critical, especially as the impacts of climate change become more pronounced.
Mitigating weather-related risks is also an important precondition to providing credit, stimulating investment in farming, and increasing productivity among smallholder farmers in Sub-Saharan Africa. High level training helps develop the skills to create new and innovative index-based insurance products in the regional market, which in turn will increase insurance penetration to rural and low-income markets in Africa.”
The workshop was delivered by the Global Index Insurance Facility, a multi-donor trust fund implemented by the World Bank Group that works to provide access to finance to smallholder farmers, micro entrepreneurs, and microfinance institutions. It gathered 12 Insurance Regulators and 29 CEOs from major insurance companies in Sub-Saharan Africa, and will be followed by a week-long training on index insurance for insurance companies’ technical staff.
The Global Index Insurance Facility (GIIF) is a multi-donor trust fund that works to provide access to finance to smallholder farmers, microentrepreneurs, and microfinance institutions through the development and growth of local markets for indexed and catastrophic insurance in developing countries.
It is supported by the European Commission; the African, Caribbean and Pacific (ACP) Group of States; Governments of the Netherlands and Japan. The facility is part of the World Bank Group’s Finance & Markets Global Practice.