In 2005, the Micro Insurance Agency began working with the World Bank to develop weather-indexed crop insurance for smallholder farmers in Malawi. Research findings revealed that most farmers could not get agricultural funding from local banks because of the high risk of crop failure due to flooding and drought and their subsequent default. However, some banks were willing to lend if the weather risk could be reduced. As part of the project, the Micro Insurance Agency developed a weather-indexed crop insurance product based on historical rainfall data. The product, whose cover is determined by the amount of rainfall in the area, pays out if there is a drought or too much rainfall. This insures the farmers against loss of crop and protects the lending institution from default. To date, this product has been piloted with 1,710 groundnut farmers and 826 maize farmers.

The World Bank has also recently appointed the Micro Insurance Agency as its technical advisor for its index-linked crop insurance products across Africa. The project will expand crop insurance to five additional countries and serve 500,000 farmers by the end of 2012.

Key Partnerships:

• World Bank Commodity Risk Management Group (CRMG)
• The Insurance Association of Malawi
• Opportunity International Bank of Malawi (OIBM)
• Malawi Rural Finance Company (MRFC)
• National Smallholders Farmers Association of Malawi (NASFAM)