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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

Making agricultural and climate risk insurance gender inclusive: How to improve access to insurance for rural women

February 2020
IFAD’s technical assistance programme INSURED (Insurance for rural resilience and economic development) has been building knowledge about how to strengthen women producers’ access to climate risk insurance. 

INSURED - Insurance for rural resilience and economic development

January 2020

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

Remote sensing for index insurance - Findings and lessons learned for smallholder agriculture

October 2017
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. 

Related stories

Talking about climate risk insurance with women in Ethiopia: How to improve value, access, and delivery

February 2020 - BLOG
Women in Ethiopia and the world over play a huge and growing role in farming and food production. 

Building women’s resilience and livelihoods

February 2020 - STORY
Around the world today, women make up over half the people working in agriculture – as smallholders, market gardeners, wage labourers, unpaid workers on family farms – and that figure is on the rise.

One size doesn’t fit all: How to design a user-friendly climate insurance

January 2020 - BLOG
Weather index insurance can protect and support smallholder farmers from climate-related disasters, providing them with means to buy food when harvests fail.