When drought hit the Southern Province of Zambia last year, 62-year-old smallholder farmer Alfred Noogna lost almost everything. “I only managed to harvest 12 bags of maize last year,” he says sadly. “In a good year, I can harvest up to 200.”
Faced with a triple whammy of crop failure, COVID-19 and economic recession, Alfred’s future was looking bleak. Fortunately, he was one of 7,800 farmers enrolled in a World Food Programme (WFP) index insurance scheme which kicked in as the drought struck, paying out ZK 621 (around US$ 42). While it doesn’t sound much, it allowed him to survive. “I used this money to buy food and essential items for me and my family,’’ he says.
It is a similar story for Kavemba Nzuki, a farmer from eastern Kenya who suffers from intermittent drought and floods. “I received KSh 4,600 (US$ 46) in compensation,” she says. “I used all of it to pay school fees for my children. Without the crop insurance I would be unable to feed my family or pay school fees.” Kavemba’s payout came through WFP’s R4 Rural Resilience Initiative, which has distributed more than US$ 2.4 million in compensation to farmers in Ethiopia, Kenya, Malawi, Senegal and Zambia since its launch in 2011.
“Smallholder farmers and others in the food value chain, including buyers and processors, face a diversity of risks in their households and businesses,” says Mathieu Dubreuil, Senior Insurance Advisor at WFP and co-chair of the MiN’s Best Practice Group (BPG) on Climate change and Food Security. “Risks can be idiosyncratic – for example, post-harvest fire, theft, property damage, poor health and death – or more widespread climate-related risks such as drought, floods and pests. Insurance is part of a holistic approach to agricultural risk management.”
This complex matrix of risks can prove the final straw for small-scale farmers in climate-vulnerable countries. A recent report from Feed the Future Innovation Lab for Markets, Risk & Resilience (MRR) at the University of California, Davis, suggests that shocks like catastrophic drought or flood “make them poor but also keep them poor.”
“We’ve long known that climate shocks like droughts and floods can empty fields and food bowls alike, but recent events constantly remind us there are still more threats,” says Sophie Javers, Policy Engagement Coordinator at the MRR Innovation Lab. “Locusts, COVID-19 and others reinforce the reality that farmers don’t just face a single risk at a time, but live in a harsh reality of compound risks.”
Drought may be the most obvious of those risks, but in northern Bangladesh it is the opposite problem – extreme rainfall and devastating floods. Afroza Begum lives with her family on a muddy island on the Brahmaputra River, constantly threatened by inundation. “There is no work during the floods,” she says. “My kids want to eat many things that I cannot afford.”
Once again, WFP index insurance provided a lifeline. In partnership with Green Delta Insurance, the scheme triggered payouts of US$ 32 during the 2020 monsoons – enough for Alfroza to buy food and rebuild her home. Encouraging research by the MRR Innovation Lab in Kenya has found that index-based livestock insurance (IBLI) can cut both the number of poor families and the cost of aid by half, by reducing the number of vulnerable families which fall into poverty.
However, insurance alone should not be seen as a long-term climate solution. “Insurance is efficient for low-frequency, high-impact shocks,” says Emily Coleman, Agricultural and Climate Risk Insurance Expert for the INSURED programme at IFAD. “But it must be connected to other instruments such as contingency funds or savings in order to manage more frequent shocks. Other risk reduction activities such as conservation agriculture are important for reducing overall exposure.”
Wherever they live, smallholder farmers face complex challenges. According to Juna Shrestha, Executive Director at ClimateRe, production is the most discussed and also addressed problem. “Most of the development and agriculture interventions are related to it [production]. But markets are difficult – in Nepal, for example, smallholders face price dumping, lack of liquidity, and production costs are higher than revenue. Socio-cultural and structural problems such as land fragmentation and labour shortage are also a major problem,” she says.
When families don’t have the capacity to absorb a shock, they often resort to costly coping mechanisms which simply push them further into long-term poverty, such as reducing meals, shedding assets or removing children from school. “These desperate measures can lead to food insecurity and loss of livelihood, and pass the burden of poverty [on] to the next generation,” says Tara Chiu, Associate Director of the MRR Innovation Lab. “Even before a shock occurs, families cope by allowing potentially profitable but costly opportunities to pass by, knowing the dire consequences if – likely, when – disaster strikes.”
As if these challenges weren’t enough, climate change – as last December’s Expert Forum highlighted – is also bad for your health. “Insurers can help by developing solutions such as parametric insurance – not just for extreme weather events but for pandemics – which guarantee fast automatic payouts,” said Dr Astrid Zwick, Head of Secretariat at the InsuResilience Global Partnership. Migration from rural to urban areas – exacerbated by unpredictable weather patterns, drought and decreasing crop yields – is already helping the spread of diseases such as malaria, dengue fever and zika virus.
For smallholder farmers in climate-vulnerable countries, insurance can help but it is by no means the complete solution. “Agricultural insurance is generally used to protect against crop, livestock, forestry or aquaculture losses,” says Mathieu Dubreuil. “But it should only be used to cover residual risks that cannot be managed in other ways. Agricultural insurance works best when it is integrated with other agricultural risk management approaches.”