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Weather index insurance for managing drought risk in smallholder agriculture: lessons and policy implications for sub-Saharan Africa

Author: Tadesse, M.
Author: Shiferaw, B.
Author: Erenstein, O.
Year: 2015
Abstract: This paper reviews recent advances in, and challenges for, weather index insurance for managing drought risk in smallholder agriculture, with a focus on sub-Saharan Africa. Despite its promise to integrate local agricultural risk smoothing with insurance principles, there remain many challenges to its mainstreaming in low income countries. Scaling up of weather index insurance pilot projects is particularly constrained by high-basis risk, related to the divergence between the calculated weather index and actual productivity loss on the farm. Various options may be considered to enhance uptake of weather index insurance. Linking reliable weather data with location-specific crop and agronomic conditions using flexible geospatial crop modeling tools is one option to reduce the basis risk. The other option is interlinking weather index insurance with credit or safety nets. In the end, insurance should be offered as part of a wider set of business services that provide real value to smallholders. Finally, the review acknowledges that the suggested conceptual solutions, especially interlinking index based weather insurance with credit will require more empirical evidence on the extent to which insurance would reduce the cost of borrowing and make credit more accessible to the smallholder farmers.
Format: PDF
Language: English
Publisher: SpringerOpen
Publisher: Springer Verlag
Publisher: Società Italiana di Economia Agraria
Copyright: CIMMYT manages Intellectual Assets as International Public Goods. The user is free to download, print, store and share this work. In case you want to translate or create any other derivative work and share or distribute such translation/derivative work, please contact indicating the work you want to use and the kind of use you intend; CIMMYT will contact you with the suitable license for that purpose.
Type: Article
Place of Publication: Germany
Pages: 1-21
Issue: 26
Volume: 3
DOI: 10.1186/s40100-015-0044-3
Keywords: Index-Based Weather Insurance
Keywords: Inter-Linkage
Keywords: Credit
Keywords: Safety Net
Country of Focus: SUB SAHARAN
Country of Focus: AFRICA
Agrovoc: DROUGHT
Journal: Agricultural and Food Economics

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  • Socioeconomics
    Including topics such as farming systems, markets, impact & targeting, innovations, and GIS

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