Smallholder Farmers Perspective on Agriculture Insurance in Malawi by Dyborn Chibonga, NASFAM CEO Presentation at Africa-Asia Conclave on Loss and Damage due to Climate Change to be held in Nairobi, Kenya from August 25 - 26, 2016

Outline of presentation About Malawi About NASFAM Agriculture Insurances in Malawi How does unfavourable Weather impact on farming business How do small farmers cope with bad weather for production Challenges in Implementing Agriculture Insurance Schemes in Malawi Ensuring an Effective Agriculture Insurance programme Page 2

Quick Facts About Malawi Population: about 16 million Population growth: 2.8%Urbanization: 14% Per capita GDP: $834 Population living in poverty: 52% Access to improved water: 66% Adult Literacy: 64% Agricultural sector provides: 85% of the labour force 35% of GDP 90% of foreign export earnings 65% of raw materials for industry Page 3

About NASFAM SHF Owned Organisation – 165,000 SHF members in 52 Associations operating in 19 Districts Exists to improve SHF livelihoods / incomes and lives through: promoting farming as a business enabling them to work through Associations linking Associations with NASCOMEX Ltd for value addition providing extension and livelihoods support. Page 4

Agricultural Insurance in Malawi The main operating agricultural insurance in Malawi is the Weather Risk Insurance (WRI) The Weather Risk Insurance is an approach that attempts to ensure that farmers are mitigated against the effects of drought or/and floods 2014/2015 Season – 1. 6 million vulnerable people 2015/2016 Season – 6.8 million vulnerable people Page 5

Weather Risk Insurance targeting Major Weather Risks: 1. Moisture stress under drought conditions Highly sensitive crops: maize, groundnuts, paprika and Soya Moderate to low sensitivity Tobacco, cotton, sorghum, chillies 2. Excessive moisture under flooding conditions All crops Page 6

How unfavourable weather impacts on farming business Reduced profitability of land due to: Land degradation (poor soils, siltation, flooding etc) due to run-off Loss of biodiversity as farmers resort to earning a living through using/destroying the environment Dry spells and drought Food insecurity and malnutrition Little or no food at household level Poor quality food for the farmers Reduced farmer incomes due to: Reduced yield and quality impact Negative returns on investment (e.g. fertilizers) Reduced credit worthiness Withdrawal of credit facilities Erosion of household assets Page 7

How do smallholder farmers cope with extreme weather? Climate Smart Agriculture (CSA): Agricultural diversification (crops and livestock) Irrigation/ winter cropping Conservation Agriculture (CA) Agroforestry Afforestation Soil Health improvement programmes Weather Risk Insurance Off Farm activities Page 8

Challenges in implementing Agriculture Insurance programmes in Malawi Lack/inadequate instruments to measure or forecast weather High interest rates and limited availability for agricultural loans (+40%pa) Small land holding sizes and lack of Secure Land Tenure leading to high transactional costs Lack of collateral for production credit Inadequate organized marketing systems that would enable loan recovery in a systematic process, e.g. at point of sale Lack of both agriculture and climate change policies Page 9

Ensuring an effective Agriculture Insurance programme to build resilience in Malawi Need for partnership with institutions providing the key services such as Farmer mobilisation, organisation and production extension Provision of credit and insurance Provision of marketing services. Crop selection The returns must be adequate to cover the cost of the input loan and the insurance premium. Building knowledge of participating farmers. They must be knowledgeable before they participate Participating farmers should be in groups for collective action Page 10

Ensuring an effective Agriculture Insurance programme to build resilience in Malawi Screening credit-worthiness of application (initial deposits). Need for a Regulatory framework as the programme grows. In the interim, a Code of Conduct alongside a Product Manual should be developed. Reduced interest rates will be an incentive for those taking insurance cover, and should offset the cost of the premiums. Page 11

“The future belongs to the organized!” Thank You! Page 12 www.nasfam.org