Madagascar’s farmers stand to build stronger climate resilience, increase productivity and more easily access financial services owing to an agricultural insurance programme announced on May 5 by international financial institution the International Finance Corporation (IFC) and the government of Madagascar.
The IFC will help Malagasy insurance companies develop targeted insurance products to protect farmers, and especially smallholder farmers, from weather-related risks and other natural disasters that threaten their livelihoods and undermine creditor confidence.
Agricultural insurance will help protect farmers from a range of natural disasters, including cyclones, droughts, floods and pest invasions.
Natural disasters cost Madagascar’s economy on average 1% of yearly gross domestic product (GDP).
Farmers, who are insured, often lower their credit risk, easing their access to other financial services, such as loans. This has been shown in countries such as Kenya, Nigeria, and the Philippines, where banks, microfinance institutions and insurance companies have collaborated to provide bundled services to smallholder farmers.
Agriculture is a significant contributor to Madagascar’s economy, accounting for about a quarter of the country’s GDP and 64% of total employment. Smallholder farmers make up about 70% of the farming population, yet more than half cite limited access to financial services as a key constraint holding back their productivity and incomes.
“Smallholder farmers are often on the front lines of risk and they deserve insurance programmes specifically targeted to meet their needs. Agricultural insurance can help them enjoy a more predictable and stable cash flow, enabling them to repay loans and improve credit worthiness, boost production and build more resilience against natural disasters and other shocks,” says IFC country manager for Madagascar Marcelle Ayo.
“The establishment of an agricultural insurance system is a sustainable solution to develop the agricultural sectors. This will encourage banks and financial institutions to support farmers through access to credit to overcome the risks associated with climate change,” adds Madagascar Minister of Agriculture, Livestock and Fisheries Fanomezantsoa Lucien Ranarivelo.
Ranarivelo is committed to developing agricultural insurance for smallholder farmers to achieve food self-sufficiency, as well as accelerated, inclusive and sustainable growth, he said.
The project is funded by the Global Index Insurance Facility (GIIF) multidonor programme, which is managed by the World Bank Group, to address the scarcity of affordable insurance protection against weather and catastrophic risks in emerging countries.
GIIF is supported by the European Commission, the African, Caribbean and Pacific Group of States, the Netherlands Ministry of Foreign Affairs, the German Federal Ministry of Economic Cooperation and Development and the Japan Ministry of Finance, the IFC notes.