Beira Agricultural Growth Corridor (BAGC) launches Mozambique’s first ever index-based weather microinsurance product

AgDevCo, manager of the BAGC Catalytic Fund, announced today the launch of Mozambique’s first ever index-based weather microinsurance product for farmers in the Chimoio region of Manica Province, Mozambique.

The insurance supports a partnership between a local agricultural training college, Instituto Superior Politecnica de Manica (ISPM) and the Beira Agricultural Growth Corridor (BAGC) under which five young Mozambican farmer trainees have been allocated five hectares of land each by the college. Under the programme, the farmers receive inputs and access to mechanised services (land reparation, planting, harvesting etc.). The farmers also receive technical support from a local commercial farmer and have a guaranteed market for their production of maize, soya, beans and sesame. The weather insurance is linked to the farmer’s input financing and is intended to provide protection against “midseason” drought.

The impetus for insurance in this region is strong especially considering the rains stopped in the middle of the last growing season. Farmers in the Chimoio region of Manica Province saw their yields drastically reduced as a result. This type of midseason drought is an increasingly common feature of changing weather patterns affecting Mozambique and other countries in the Southern Africa region. For the first time in Mozambique, a small number of farmers will this season have some protection against such a drought.

With good rains the farmers can expect to make profits of more than $400 per hectare. In the event of a severe mid-season drought, the farmers will receive a pay-out to help prevent them from running up debts. A payout is triggered in the event that rainfall falls below a minimum stipulated level, as measured by satellite systems which are accurate enough to monitor precipitation in 10km2 blocks.

The cost of weather index insurance remains a challenge, due to the high risks. For this pilot, farmers can afford the weather insurance premium because they pay no interest on the finance for the inputs and other services. Scaling up the drought insurance programme will depend largely on finding innovative ways to reduce the cost of coverage.

The weather index insurance product was developed by Guy Carpenter & Company, LLC unit GC Micro Risk Solutions® alongside RMS affiliate Asia Risk Centre, Inc. with a grant from the International Finance Corporation’s Global Index Insurance Facility (GIIF). The weather product is underwritten by Hollard Moçambique Companhia de Seguros. Finance for farmer inputs and extension services was provided by the BAGC Catalytic Fund, which is managed by AgDevCo, with support from the social lender Kiva.