Microinsurance policy to protect 500m smallholders


…against high-risk climate change

The global gathering of world leaders, scientists and youth activists at the 2023 UN Climate Change Conference of Parties (COP28) in Dubai, UAE was as important as the 2023 SDG Summit, all with the sense of mobilising finance, power, institutions and innovative technologies to advance Paris Climate Agreement and Agenda 2030 for Sustainable Development. Ghanaian officials attended the event. At the COP28 event, one of the achievements was the endorsement of the Loss and Damage Fund (L & D Fund). The L & D Fund is a financial instrument targeted at lessening climate burdens on vulnerable nations in the Global South. As good as L & D Fund sounds, very little or absolutely nothing is heard about an insurance policy to safeguard and cushion the plight of the most vulnerables people hardest hit by economic, social and climate hardships. The closest win to liken to such a policy it the L & D Fund. In this write-up, I highlighted the fact that nothing is urgently required than a Global Climate Microinsurance Policy (GCMP) to track and protect nearly 500 million smallholders engaged in on-farm and off-farm activities from devastating climate-induced risks such as earthquakes, wildfires, droughts, viral diseases, insect invasions and storm flooding.

Climate impacts, risks and tipping dynamics

The case to roll out microinsurance to provide relief along the supply and value chain for smallholders against climate change loss and damage (C2LAD) is increasingly turning out to be a human right, economic justice and humanitarian matter. This is because the sufferings being imposed by dangerous climate system risks, particularly in the Global South, on the smallholders involved in farming, hunting, herding, fishing, processing or trading green agrocommodities is harshly dehumanising, restricting freedom and limiting financial stability. The climate impacts on the smallholders are so severe that the majority of them could be perfectly described as climate refugees or migrants. Some smallholders operating in the earthworm economy have become bankrupt because the crops they cultivated through the support of loans or rented land propertieas are flooded, worm-infested or wilted beyond harvesting. No crop produce or aquacultured fish was available to harvest in order to repay loans, as it happened during the October 2023 spillage of excess water from the Akosombo Dam by the Volta River Authority. The spillage submerged, displaced and affected over 35,000 people in the downstream of the Volta River (VRA). Coastal and riverine communities like Mepe, Azizanya, Sokpoe, Havui and Fuveme were severely battered by VRA-floods . Hearing a knock of a dearest friend at the door is mistaken as a knock from a Police Officer, wanting to effect an arrest of a debt defaulter. Apart from financial hardships, the non-economic loss and damage (NELD) was substantial and posed threats for personal health budget. Hidden mental and emotional trauma for vulnerable children, aged, youth and women! For the earthworm economy, climate is the greatest driving factor of unsustainable socio-financial conditions. Hot climate aggravates agri-trading and fish processing risks e.g. postharvest loss. Adversely rising temperature has threatened human-environments and socio-economic welfares that need to be rapidly reversed through decarbonisation of energy and transport infrastructure. The global endorsement of the UN Sustainable Development Goals (SDGs) and Paris Climate Agreement are evidence of how changing climate is acknowledged as a pressing geosustainability issue if world development economies to are to greenly grow and stabilise.

Climate change is constantly limiting the quantify and flow of ecosystem-based services, biomaterials and water quality requirements for agri-related industries – a situation resulting in the insecurity of food, water and shelter needs with inverse implications for global sustainability. Human welfare and security is damaged once biomaterial supply chain is distorted by climate impact. The Norvisi Gari Processing Association (NGPA) based at Anloga, a suburb of Kumasi Metropolis, is one of the many smallholder groups that experienced C2LAD that I could cite here. The smallholder-based groups, like the NGPA deserves consideration in digitalised microinsurance packages to help cushion climate imposed risks and burdens. Most often climate change limits the flow of raw cassava from the hinterlands. Investigation showed that, occasionally, members of the NGPA had to import fresh cassava from the neighbouring Togo or Ivory Coast before they could continuously process and therein remain in agri-business. The crucial problem is that the imported cassava at times stays in transit for a longer period than it is expected. The longer it takes to transport cassava without using ‘modern preservation technology’ the poorer is the end quality of the processed cassava i.e. ‘gari’. The quality of gari that does not meet consumer standard attracts lower prices. The poor market price greatly reduces income for the NGPA members, predominantly industrious women, and hence lessens their financial capabilities to reinvest and continue cassava processing. The gari business is eventually halted due to biomaterial shortage or cheap price triggered by climate extremes. This reproduces underlying repercussions not only for the women’s welfare but also for the larger urban dwellers who become potentially susceptible to urban food insecurity issues. Today, decision-making linked to risks taken by smallholders involved in agri-food processing, charcoal production, cocoa cropping, fishing and the indigenous business of mixed farming linked to extreme climatic events are not studied to improve understanding of how to financially plan and execute pro-poor insurance interventions. Also, accurate data about indigenous smallholders’ financial risks and behaviours to encourage the design of comprehensive microinsurance policy is missing. New scientific data needs to be disclosed from bottom-up to enlighten and motivate policy innovators, decision makers, bankers, and insurers to take urgent actions.

In fact, climate change has profound consequence for the sustainability and stability of green economy, especially in the Global South. And, green economy, including green industrialisation, is key for promoting sustainable consumption and production (SDG#12) to ensure environmental resource use efficiency and circularity. For most agri-food industries, their operations are largely informal and yet they are the engine of indigenous food economies. The informally operated agri-industries heavily rely on the products or services that depend on rainfed agriculture, forests, grasslands and waterbodies. The informal agri-industries are common in Ghana, Bangladesh, Nigeria, India, Zimbabwe, Senegal, Cameroon and other developing countries. Almost 80% of these industries are owned and managed by women who have no basic formal education and no access to low-interest finance. A typical female agroindustralist performs almost every job function from gathering of the raw materials, processing, packaging, pricing to retailing of the finished products. The informal industries depend on family labour and fuelwood for energy, which is also linked to climate-driven ecosystems. Thus, sudden changes in the Earth’s climate system means that planning of energy, business activities and inputs remains heuristically ad hoc. The commitment for practising of sustainability, environmental and green economic standards becomes too thin among the smallholders, needing attention.

Exploring data for informing GCMP

The smallholders play substantial role, in aggregate terms, by processing over 70% of consumable foods, creation of jobs, and the supply of industrial biomaterials and foodstuffs to local and international markets. One can think of the 5Cs i.e. cocoa, coffee, cotton, cassava and corn. The contribution of women-oriented smallholder groups demonstrates that they are indispensable actors for production and distribution of the 5Cs towards the attainment of no hunger, no poverty, climate neutrality, and the rest of the SDGs. However, it is pathetic that how smallholders make choices and decisions surrounding climate change and its connection to agri-industrial cycles, biodiversity, and biomass energy is not scientifically researched to unearth realistic data to aid co-design and implementation of GCMP for empowering them to tackle systemic risks bearing on conflict, gender, carbon, income, energy, health, education and safety. A systemic risk assessment (SRA) is needed not only to generate scientific data to boost rethinking sustainable change systems or GCMP formation but also to formulate eco-entrepreneurship models that assist in incorporating digital innovations and soft values to help the poor. SRA lights mind and path to find hope within crisis. The growing governmental, NGO and civil society movements to find solutions to climate change impacts and other sustainability challenges from the grassroots to global levels require that polycomplex risks confronting smallholders are not neglected but collectively resolved to expand social welfare and financial opportunities through the GCMP.

Comparative geographies of climate change by the Intergovernmental Panel on Climate Change apparently reveal evidences that global warming at 1.5°C is sharply overturning economies to worsen financial debts. Yet, the influence of climate change on the choices, decisions and capabilities of smallholders, especially in the Global South, is not fully studied across (in)formal sectors to improve GCMP action-taking. Generating realistic data by researching the activities and behaviours of the smallholder-based groups like the NGPA, is necessary to deepen understanding of how climate-risk-insurance packages can be practised for financial and economic improvements among smallholders. Such data will facilitate planning, legal regulations, monitoring, how to appropriately communicate to and engage smallholders and others troubled by high-risk climate extremes as well as how to promote inclusion of the poorest in climate negotiations, governance and risk-sharing. Additionally, the researched data can guide and facilitate networking of smallholders into productive business associations through which polycrisis can be cooperatively diagnosed.

Remarks for taking collective policy action

The idea of a GCMP is relevant not only for socially tipping to stabilise and sustain the World-Human-Earth’s Systems but also for accelerating socio-economic transformation, prosperity and sustainability. Ideally, the notion is to implement GCMP for smallholders should begin by elucidating new market and socio-ecological variables through SRA that contextualises the fact that C2LAD impacts vary socially and geographically. From the SRA data, it will be possible to identify system change indicators pertaining to sustainable finance, including how much is needed to formulate and implement a smallholder-centred GCMP that will ‘leave no one behind’. If we need rapid societal transformation to help us realise the vision of a sustainable future, then we must take a greener step and pay a serious policy attention to how a GCMP can enable over 500 million smallholders to resiliently adapt, sustainably manage planetary services and mitigate CO2 emissions negatively manipulating the larger Earth’s systems. The GCMP is a crucial matter for futurist visions. Microinsurance policy must not be relegated during climate finance and sustainability action deliberations in search of actionable policies, innovative practices and sustainable solutions to rebuild financially sound society, carbon-neutral and greener Earth for all.

Sylvanus is a Sustainability Specialist, and a Research Fellow of the Earth System Governance Project based at the Utrecht University, The Netherlands.

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