African smallholder farmers get insurance payouts of US $1.5 million after low rainfall
Poor rainfall in parts of Africa has triggered the largest insurance pay-out to date for vulnerable farmers under an innovative climate risk management scheme known as the R4 Rural Resilience Initiative (R4). Farmers participating in R4 – launched by the United Nations World Food Programme (WFP) and Oxfam America in 2011 - will receive insurance payments totalling US$ 1.5 million to compensate for weather-related crop losses in Ethiopia, Kenya, Malawi, Senegal and Zambia.
The pay-out enables nearly 30,000 farming households to cover immediate needs including the purchase of food and payment of children’s school fees. Many smallholders also invest a portion of the pay-out in seeds or fertilizers, or in starting small-scale family businesses.
Insurance is a central component of R4, providing smallholders with protection against extreme weather shocks linked to climate change. Insurance payments are based on an index of rainfall, vegetation or yield estimates determining the extent of the loss incurred by participating farmers. Compensation is paid if the index falls below a pre-determined threshold – in this most recent instance, it was because of drought during the growing seasons in the five countries.
“In Malawi, more than 7,000 drought-affected families will receive an insurance payment worth US$ 400,000. This is the first time that a weather index insurance programme has delivered payouts at such a large scale in Malawi, “says Benoit Thiry, Country Director for WFP Malawi. “Insurance is a key element which complements other initiatives being undertaken to make people more resilient to weather-related shocks.”
R4 combines four inter-linked elements: improved natural resource management (risk reduction), insurance (risk transfer), the promotion of investment including better access to micro-credit (prudent risk taking) and savings (risk reserves). The initiative reaches over 57,000 farmers in Africa who are vulnerable to climate risk.
Since 2011, a total of more than US$2.4 million have been distributed in pay-outs to R4 participants in Ethiopia, Senegal, Kenya, Zambia and Malawi as compensation for weather-related losses. The programme is supported by the governments of the United States, Switzerland, Flanders, the United Kingdom, France, the Republic of Korea, Canada and Sweden.