Case study: Examining the World Bank’s index-based Insurance Scheme in Malawi

Climate has become an urgent issue on the development of Malawi because the economy is dependent on agriculture and majority of Malawians are small-holder farmers. Over 90% of Malawi’s crop production is rainfed, taking place during a single rainy season lasting from December to April when the Inter-Tropical Convergence Zone (ITCZ) is northward-bound as the high pressure cells intensify over South Africa and the Mozambique Channel. Rainfall during this period tends to be highly erratic and drought is a recurrent problem, often causing widespread crop failure. In addition, the risk of drought is a major factor keeping productivity low, since even in good years farmers are wary of using inputs such as improved seeds and fertilizers for fear of losing their investment.

As such World Bank initiated a pilot project on climate insurance in 2005. The World Bank initiated this project with the Malawi Department of Climate Change and Meteorological Services as a participating partner, was testing a new way of dealing with drought risk by the provision of index-based weather insurance directly to smallholder farmers. The project was primarily driven by the private sector and goes to the heart of food insecurity in Malawi by tackling the major cause of low levels of farmer investment in new technology. This case study examines how well the World Bank’s Index-based Insurance Scheme pilot project worked in Malawi and the degree of its sustainability and upscaling and maps activities to the WMO 8-Step Capacity Development model.

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