2. Outline
•Why weather-based crop insurance in Malawi?
•Design and implementation
•Outcome of the insurance scheme
•Can crop insurance improve finance for agriculture
in Africa?- potential opportunities and pitfalls
3. Context
•Over 70% of population engaged in agriculture
•Low productivity: gap between potential vs actual crop
yield, inputs use very low
•Agric is dependent almost entirely on single rainfall
regime per season
•Poor access to finance for agriculture, perceived as a risky
venture
•To become worse with due to climatic uncertainties
5. Table 1: Frequency of crop failure reported by farmers
in Shire Basin over a five-year period
Frequency of
crop failure
Proportion of farmers (%)
Male Female All
None 38 35 38
Once 9 7 9
Twice 22 20 21
Thrice 24 36 27
4 or more 7 2 5
Total 100 100 100
6. Why & when?
Objective:
•Help farmers to access loans and improved farm inputs,
•Insulates finance institutions and farmers from the
vagaries of weather
•When- began in 2005/2006 season
•Crops insured- groundnut and maize (based on different criteria)
7. Partnerships
Partner Role
Farmers’ organization
(main beneficiaries)
Organizes several smallholder farmers
together
Government technical
deptartments
Establish a “Weather Index” for crops,
to know when insurance payment is
triggered
Insurance company
Provides insurance cover for the farm
inputs
Banks & finance
corporation
Provides funds to purchase farm inputs
for farmers
8. Table 2: Outcome-
loan secured through the scheme insurance in pilot
districts
Agric season District
No of farm
families
Total loan (US$)
Year 1
Lilongwe North 79 3,316
Kasungu 223 1,175
Nkhotakota 580 23,345
Mchinji 0 0
Total Year1 882 27,860
Year 2
Lilongwe North 494 61,255
Kasungu 419 13,766
Nkhotakota 122 4,197
Mchinji 672 38,218
Total year2 1,707 117,436
Two-Year Total 2,589 145,296
Source: NASFAM
9. Crop insurance-
to be or not to be?
•Quality of weather data & weather stations
•Extent of coverage of insurance-
– drought or/and flood?
– absolute rainfall or temporal distribution?
•Twinning food crops and cash crops for same household
•The dilemma of maize in crop insurance schemes
•Upfront part-payment of insurance premiums
•Information gap & sensitization on how insurance works