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Smallholder farmers and poor rural households live and work in a high-risk environment and are extremely vulnerable to local and global shocks. Agriculture is their main source of food and income, and this is the sector hardest hit by the climate breakdown. Climate-related shocks, including droughts, floods and pests, can strike whole communities and wipe out agricultural production. But there are other multiple interlocking risks that severely undermine the resilience of poor rural populations, as demonstrated by the impacts of the COVID-19 crisis.

Without tools to address these risks, poor rural households are locked into a vicious cycle of shocks and poverty traps that reduce consumption, deplete precious savings and assets, and limit productive investments. Strengthening the resilience of poor rural women and men – their capacity to cope and recover – is a vital part of IFAD’s work and is enshrined in the first Sustainable Development Goal.

Insurance can play a key role in building resilience, and in increasing and protecting the impact of IFAD-financed projects. Approached in the right way, insurance contributes to economic growth, providing financial stability, fostering investment, facilitating trade and commerce, and enabling risks to be managed more efficiently.

Focus on agricultural and climate risk

Together with the multi-donor Platform for Agricultural Risk Management (PARM), WFP and other partners, IFAD has been working to develop and share insurance expertise since 2008. The Fund has a particular focus on agricultural and climate risk insurance, recognizing it as a tool within a holistic approach to agricultural risk management and rural development. Agricultural and climate risk insurance can be  ‘bundled’ with financial and non-financial  services and inputs, including seed, fertilizer, credit, and even other types of inclusive insurance, such as for health or  business interruption.

IFAD-financed programmes can play a critical role in supporting and facilitating the growth of sustainable insurance markets in rural areas and in scheme delivery to smallholder farmers and rural entrepreneurs. This catalyses private sector investment in development, enabling financial service providers to reach out to typically ‘risky’ clients, and making it possible for them to secure their businesses.

The IFAD-financed portfolio is currently supported by two special technical assistance initiatives managed by PARM: the Sida-financed INSURED programme (Insurance for Rural Resilience and Economic Development programme) and the IFAD-financed grant Managing Risk for Rural Development: Promoting Microinsurance Innovations, implemented by the MicroInsurance Centre@Milliman (MIC@M). These initiatives build on IFAD’s insurance cooperation with WFP through the Weather Risk Management Facility.

Related publications

Related publications

INSURED - Insurance for rural resilience and economic development

October 2022
INSURED is a technical assistance programme working to strengthen agricultural insurance in IFAD’s portfolio.

Filling in the blanks: How to address data gaps to develop better livestock insurance for smallholder farmers

September 2022
Gathering good data can reduce the cost of livestock insurance for smallholder farmers, making coverage affordable and building their resilience. The Insurance Toolkit new brief shares lessons learned in Georgia.

Engaging smallholder farmer communities to develop index-based insurance

August 2022
This knowledge brief explores the benefits of and rationale for community engagement in index insurance initiatives, with examples from a pilot project in rural Ethiopia.

Related stories

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What I’ve learned about resilience from rural communities in Guatemala

October 2022 - BLOG
Faced with the impacts of climate change, small-scale producers in Guatemala urgently need to manage risk using tools like insurance. Read how INSURED promotes the use of agricultural insurance to build resilience and strengthen livelihoods.

Promises kept: Crop insurance makes a difference for Kenya’s small-scale farmers

March 2022 - STORY
Farming can be a risky business indeed. Recently, some IFAD-supported initiatives have begun piloting crop insurance programmes for participating farmers – and for KCEP-CRAL farmers in Kenya, the new insurance policies arrived just in time.

Bringing the benefits of agricultural insurance to smallholders in Viet Nam: Building awareness and understanding

November 2021 - STORY
Between sowing their seeds and selling their harvest, smallholder farmers in developing countries face a multitude of potentially devastating risks. In Viet Nam, as in countries around the world, many of the most severe threats are climate-related, including storms, floods, excessive heat, frost and drought.