Attachments
Executive summary
Index insurance has a role to play in agricultural development and risk management, yet it faces operational and technical challenges to reach scale and sustainability. Data are a key challenge and were the focus of the project “Improving Agricultural Risk Management in Sub-Saharan Africa: Remote Sensing for Index Insurance”. Limited availability, accessibility, quantity and poor quality of data on the ground are some of the primary technical constraints preventing scale-up and sustainability of index insurance. Without sufficient quality data, either it is impossible to design products for some areas and countries, or products that are designed can become unreliable, not compensating when they should. These inconsistencies intensify vulnerability, lead to distrust of insurance, and ultimately have an impact on demand. This publication details the project, which investigated overcoming issues with ground data by using remote sensing data for index insurance. It describes the different remote sensing options and opportunities available for index insurance, but it also recommends further investment in research and development, supplementary ground data and capacity-building going forward.
With financial support from the Agence Française de Développement (AFD) and an additional contribution from the Belgian Federal Science Policy Office (BELSPO), the project was carried out by the Weather Risk Management Facility (WRMF). The WRMF was established by the International Fund for Agricultural Development (IFAD) and the World Food Programme (WFP) in 2008. It supports initiatives aimed at reducing smallholders’ vulnerability to weather and other agricultural production risks, in order to encourage and protect investments in smallholder agricultural production and contribute to food security. The WRMF does this through research, technical assistance and capacity-building, and implementation of innovative risk management solutions, such as agricultural index insurance.
Smallholder farmers, the focus of the project, are particularly exposed to the unpredictability of climate-related risks. Such risks are difficult to tackle because they typically strike many farmers in the same area and at the same time, making most risk management approaches or coping mechanisms unfeasible. In addition, climate change further intensifies these risks.
Climate-related production risks trap households in poverty and food insecurity. Without reliable tools to protect against these risks, smallholders forgo opportunities to become more productive by continuing to focus on more resilient but less profitable production activities and not investing in better quality inputs and technology. Exacerbating this situation, financial service providers fear offering financial products and services; input suppliers limit their outreach; and even the sustainability of well-intended donor and government interventions is threatened by external shocks.