Posted on July, 12, 2024 at 08:47 am
One Acre Fund and Global Parametrics, a CelsiusPro Group company, have partnered to provide financial protection for smallholder farmers in Zambia and Malawi against the financial strain of losing their crop due to drought.
Using data collected and verified by One Acre Fund from individual farmers, the companies developed a water-balance index to calculate payouts.
The index, which relies on weather data from independent third parties, measures the balance between rainfall and evapotranspiration over a specific period, yielding a measure of availability of water for crops.
“Thanks to the index-based solution, farmers do not need to present proof of loss or undergo lengthy damage assessments. If the water balance index falls below a specified threshold, payouts are triggered,” Mark Rueegg, CEO of CelsiusPro Group, explained.
Climate change is severely impacting smallholder agriculture in Zambia and Malawi, reducing farm productivity due to unpredictable rainfall and drought.
This season, El Niño phenomenon caused droughts in both countries. Payments exceeding MWK 1.41 billion (around USD 812,600) have already been issued to smallholder farmers in Zambia and Malawi, which would be approximately 77,600 beneficiaries.
Risk capacity for One Acre Fund’s smallholder loan portfolio is provided by the Natural Disaster Fund (NDF), managed by Global Parametrics.
The NDF, a public-private partnership funded by UK and German governmental entities and shares risks with Hannover Re, is mandated to provide risk capacity for parametric solutions that enhance climate and natural catastrophe resilience for poor and vulnerable communities.
“Putting farmers first is embedded in everything we do at One Acre Fund. With El Niño looming, we worked to find ways to cushion farmers from the devastating effects of drought on their crops, which is their main source of livelihood,” said Luke Viljoen, One Acre Fund Zambia’s Country Director.
Adding: “Smallholders manage the majority of Zambia’s arable land, so supporting them and building their resilience is paramount. With our growing base of farmers, more can access innovative solutions that protect them from drought and floods.
“Providing them with much-needed financial relief will help accelerate sustainable agriculture transformation and improve agricultural resilience for the nation.”
Source: Reinsurance News