Washington, 4 June 2012 – Dov Zerah, Chief Executive Officer of the Agence Française de Développement (AFD), and Kanayo F. Nwanze, President of the International Fund for Agricultural Development (IFAD), signed a financing agreement to support the development of agricultural index insurance in West Africa.
Weather index-based insurance can help secure the income of smallholders who are particularly vulnerable to climate variability. It can improve rural livelihoods and reduce food insecurity. One of the aims is also to improve access to credit by lowering the risk of default for financial institutions.
Over the past few years, index-based crop insurance has been developed and brought to scale, particularly in India and Latin America. Compensation is calculated using an index, such as the level of rainfall, which represents as closely as possible the impact that weather shocks have on yields and therefore incomes. This precludes the need to assess losses on farmers’ plots, which is a long and costly process. To date, there have been few experiences in West Africa.
The development of a range of specific crop insurance products will help protect producer incomes in the event of weather shocks, improving their capacity to invest in their farms and thereby contributing to improved food security for the region.
The objective of the project is to set up a mechanism for monitoring and managing weather risk through the development and testing of an innovative index-based insurance approach in West Africa. More specifically, the project aims to put in place adapted technical solutions by using satellite technology to measure the impact of weather shocks on yields.
AFD is combining this with support to Planet Guarantee, co-financed with the Global Index Insurance Facility, a programme of the International Finance Corporation, which is part of the World Bank Group. This component will contribute to the launching and testing on a larger scale of agricultural index insurance for the region, and will contribute to mitigate food-price volatility in markets.
The financing agreement signed by AFD and IFAD is a new example of collaboration between the two institutions, that already cooperate together through the African Agriculture Fund, the African Agribusiness and Agroindustries Development Initiative, and other cofinancing. Managing agricultural risk is a core focus of the project, which calls for preparation of a multi-donor platform to improve coordination among donors and to meet demand from partner countries on this issue.
Press release No.: IFAD/31/2012
The International Fund for Agricultural Development (IFAD) works with poor rural people to enable them to grow and sell more food, increase their incomes and determine the direction of their own lives. Since 1978, IFAD has invested almost US$14 billion in grants and low-interest loans to developing countries through projects empowering about 400 million people to break out of poverty, thereby helping to create vibrant rural communities. IFAD is an international financial institution and a specialized UN agency based in Rome – the United Nations’ food and agriculture hub. It is a unique partnership of 168 members from the Organization of the Petroleum Exporting Countries (OPEC), other developing countries and the Organization for Economic Co‑operation and Development (OECD)
About the French Development Agency
Agence Française de Développement (AFD) is a public development finance institution that has been working to fight poverty and foster economic growth in developing countries and the French Overseas Communities for seventy years. It executes the policy defined by the French Government.
AFD is present on four continents where it has an international network of seventy agencies and representation offices, including nine in the French Overseas Communities and one in Brussels. It finances and supports projects that improve people’s living conditions, promote economic growth and protect the planet, such as schooling for children, maternal health, support for farmers and small businesses, water supply, tropical forest preservation, and the fight against climate change.
In 2011, AFD approved nearly €6.9 billion to finance activities in developing countries and the French Overseas Communities. The funds will help get 4 million children into primary school and 2 million into secondary school; they will also improve drinking water supply for 1.53 million people. Energy efficiency projects financed by AFD in 2011 will save nearly 3.8 million tons of carbon dioxide emissions annually.