Drought Insurance Programme Reduces Risks for Malawi Smallholder Farmers

An innovative programme launched in 2005 for groundnut farmers in Malawi helps farmers to obtain certified seeds, which produce increased yields and revenues as well as greater resistance to disease.

In addition, the National Smallholder Farmers’ Association of Malawi, in conjunction with the Insurance Association of Malawi and with technical assistance from the World Bank and Opportunity International Network, financed by the Swiss State Secretariat for Economic Affairs, has designed an index-based weather insurance contract for these farmers.

If a drought leads to insufficient groundnut production, the bank pays the loans of insured farmers directly. If there is no drought, the farmers benefit from selling the higher-value production.

This is the first time that such index-based weather insurance policies have been sold to smallholder farmers in Africa. A similar pilot in India in 2003 has been expanded to more than 250,000 farmers.