IFC, Africa Re develop index products to increase access to finance for farmers
IFC, a member of the World Bank Group, and Africa Reinsurance Corporation has supported a two-day technical workshop on risk modelling and strategic decision-making for index insurance products.
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 that 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,” he said.
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.
The workshop was delivered by the Global Index Insurance Facility, a multi-donor trust fund implemented by the World Bank Group. It works to provide access to finance to smallholder farmers, micro entrepreneurs, and microfinance institutions.
In all, it brought together 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.