When the World Food Programme (WFP) and Oxfam launched the R4 Rural Resilience Initiative in 2011, it was with the aim of taking an innovative approach to improving food security and tackling the impacts of climate change. WFP was the first UN agency to look at incorporating microinsurance into the broader strategy of managing climate risk in chronically and transient food insecure areas prone to recurrent droughts and floods. In doing this, it helps communities to build resilience, grow their incomes and improve their wellbeing against these climate shocks which continue to increase. Now, more than ten years on, the programme reaches over 3.8m people across 21 countries.
The R4 Initiative was developed around four key risk management strategies: Risk reduction of climate-related shock through nature-based solutions and improved agricultural practices; risk transfer of catastrophic events to private insurance, specifically microinsurance; risk retention of households and communities by promoting group savings and integrating them into social protection systems; and prudent risk-taking through financial education, livelihood diversification and credit access, facilitating better investments.
An innovative approach incorporating microinsurance
The aim of the initiative was to tackle Sustainable Development Goal (SDG) 2 - Zero Hunger by 2030 - but incorporating microinsurance has also contributed to tackling several other SDGs, including No Poverty (SDG 1), Climate Action (13), Life on Land (15) and Partnerships (17). There are several other innovative aspects to this initiative. Firstly, vulnerable households can access index insurance by participating in risk management activities. This means they can recover faster from extreme weather events because they don’t need to sell productive assets to survive. Secondly, R4 is focused on developing innovative insurance products including: Weather-Index Insurance (WII), Area Yield Index Insurance (AYII), which covers a range of risks that can affect crop yields; Index-based Livestock Insurance (IBLI), which covers livestock farmers when there is limited vegetation for grazing; and Hybrid Index Insurance (HII) which combines elements of WII and AYII.
Insurance also enables people to invest in both riskier enterprises that have the potential to yield greater returns, and in resources and equipment that can help them to successfully grow and harvest more crops. The returns of these investments, combined with the security that risk transfer brings, means households can build up savings and become more resilient to future shocks. This has contributed greatly to bringing families out of poverty. Another innovative element of R4 is its long-term funding structure. Initially, insurance is funded by the WFP, government subsidies and existing social protection systems, along with donor-funded programmes and commercial schemes. However, to achieve long-term sustainability, beneficiaries of the system transition to paying for the insurance themselves as they become more financially independent.
And the initiative is already seeing success, reaching almost 4m people across Asia, Africa, Latin America and the Caribbean. To date, insurance products have paid out more than USD 12.6m, supporting more than 1.8m people. This success is due to several factors. Internally, the WFP’s agenda of saving and changing lives (and climate) has resonated, with strong ground mobilisation and management support. Their integrated approach and broad outreach strategy has been supported by the fact that it is the biggest humanitarian agency, and the capital development and monitoring, evaluating and learning (MEL) practices have also helped, along with a culture of innovation that encourages creative thinking.
Externally, the factors that have determined success include strong government leadership and participation, which includes linking to local social protection programmes and subsidies, as well as communicating the benefits of the programme to the wider population and providing an enabling policy environment. Country stability is also crucial, which enables the growth of the private sector, supports the development of key infrastructure such as internet connectivity, and helps financial inclusion (including access to basic banking, loans and savings). Partnerships with other INGOs that have a common agenda have also helped to grow this initiative across the 21 countries to date.
R4 in action: success stories across the regions
One of the countries that has benefited is Malawi. The programme started in 2015 with a focus on: risk reduction, that aimed to improve water and soil retention and to promote conservation agriculture in exchange for food and cash; risk transfer through access to weather-index insurance; the promotion of savings through village savings and loans (VSL) groups; and credit activities through microfinance. This was piloted during 2015 with 500 farmers registering for the insurance. By 2019, 39,000 were covered and this has now grown to 309,000 people. In 2021, 65,000 farming households received cash payouts totalling USD 2.4m - one of the largest crop index insurance payouts ever on the African continent – due to climate-related shocks.
There are more success stories across other countries covered. In Kenya, AYII payouts helped farmers following a failed agricultural season, with 963 receiving a payout. A survey of 124 of these recipients found that 85% bought food, 39% livestock, 29% agricultural inputs and 31% used it to pay school fees. The payout therefore helped them to protect their livelihoods in the long term by enabling them to buy productive assets. In Senegal, from a trial in 2015 with 233 farmers the initiative grew to 1,543 farmers covered by 2017, with a total of 404 farmers receiving payouts because of poor rainfall in 2015 and 2016. This programme was successful in reaching smallholder farmers thanks to a few key elements: adding value to insurance products by bundling them with inputs and services; increasing efficiency by aggregating distribution through farmers’ organisations and unions; and by using satellite data for regions where ground data is hard to get. And in Haiti in 2022, the WFP implemented a Weather Index Insurance (WII) pilot under R4 which protected almost 5000 smallholders (51% of which are women) against excess and deficit of rain. By 2024, they aim to scale up the programme to cover 50,000 farmers (61% women) with microinsurance.
Tackling the challenges of rolling out R4
Despite the successes, there are pain points to overcome, including strategic challenges – such as ensuring the sustainability of the initiative and securing funding – and operational difficulties around the manual nature of the rollout, the high administrative costs and delays for claims and registration. There are also challenges with developing the product, from creating the wrong expectations to finding ways to bundle it with other financial services. Capacity issues - such as a lack of readiness and infrastructure for digitalisation – can also create barriers to further rollout of the programme, as does the search for partners to support the scheme, in particular formal financial institutions to provide other financial products.
Another important challenge the R4 Initiative faces is accessing and building trust among the communities that need the most support. This is one of the five avenues of growth that the WFP have identified for the programme. They aim to develop the supply side through mechanisms such as government ownership and blended finance. They are also working with local community groups, agricultural organisations and unions to be able to distribute the support more efficiently, as is the case in Senegal. By operating through existing support networks, this also helps to build trust with rural communities who are often either unaware or sceptical of insurance. In Haiti, for example, women can access insurance through an association called ASOFAD. The members (currently around 200) can also access financial education and literacy training through the association. Another area of growth focused on building trust is ensuring that a human-centred approach is taken to help the beneficiaries of the programme feel heard. This includes improving monitoring and evaluation practices and KPIs, and implementing an effective dispute mechanism.
Wholistic capacity development is another of the growth avenues that the WFP is focused on. This aims to help farmers and rural communities understand the benefits of insurance through offering financial and digital education and encouraging strong local participation in the programme. They aim to improve risk management strategies through smart subsidies, smart agricultural practices and mitigation and adaptation strategies, such as nature-based solutions and layering of different financial mechanisms to protect against loss and damage. The final growth avenue for the WFP is helping farmers and communities involved in the initiative to grow. To achieve this, there is a focus on helping them to get access to markets, to offer business advisory services to help them make more strategic decisions, and to enable access to formal finance.
The success the R4 Initiative has had to date and its ambition to help rural communities across climate impacted regions shows it is taking positive steps towards tackling five of the SDGs. And microinsurance plays a crucial role in driving the programme’s success. However, it is just one part or a broader integrated risk management strategy. Helping people help themselves by reducing risk where possible, building savings and making financially sound decisions around investment in their businesses, makes them more resilient in the long-term and less affected by sudden losses caused by climate related events. This is not only a win for the communities themselves, but for insurance providers too.