Access to Finance Africa - Micro Retail


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Nairobi, 15th July, 2014. Presentation by Shadrek Mapfumo (Global Index Insurance Facility in Africa) on Day 1 of the Fin4Ag conference

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Access to Finance Africa - Micro Retail

  1. 1. Global Index Insurance Facility in Africa GIIF is funded by: OFFICIAL USE ONLY 1
  2. 2. Index insurance pays out benefits on the basis of transparent parameters (e.g. rainfall level) without the traditional services of insurance claims assessors, allowing for faster and more objective claims settlement. What is index insurance? Covers crops against extreme WEATHER and catastrophes Uses multiple sources of DATA Highly ADAPTABLE to local conditions 2 CONFIDENTIAL
  3. 3. Climate change and agriculture in Mozambique Why is IFC involved? • Agriculture accounts for 32%of GDP and provides a livelihood to almost 81% of the labor force. • The majority of production is by smallholder families, many of whom combine food crops with a single cash crop such as cotton. • The majority of Mozambican agriculture is rain fed and therefore very sensitive to climatic conditions. • Climate change models indicate an increased likelihood of extreme weather events such as flood, drought, and cyclones leading to severe negative impacts on the agricultural sector in Mozambique. Impact on agribusinesses Impact of climate change Agriculture in Mozambique 3 CONFIDENTIAL Food insecure population
  4. 4. The index insurance value chain• Intermediary/broker designs product to cover company’s portfolio, with input from agribusiness management and staff • Agribusiness purchases portfolio insurance from local insurer on behalf of farmers • Insurer transfers part of the risk to international reinsurance companies, insuring an influx of foreign capital in case of major catastrophe • In case of weather event, insurance company transfers payout to agribusiness • Agribusiness can use payout to provide loan balance credits, replacement inputs, or value add services Farmers Farmers Farmers Insurance Company Payout in case of weather event Reinsurance Company Intermediary /Broker Agribusiness Premium payment Inputs/loan *loan balance credit or add in case of payout Product design Risk transfer Payout in case of weather event 4 CONFIDENTIAL
  5. 5. Insured $333k in inputs $55k paid in premiums Received payout of $153k IFC OLAM OLAM Mozambique IFC ENGAGEMENT OLAM Mozambique • Operates contract farming and food processing schemes for seven value chains. • Assists contract farmers with inputs, financing and extension services IFC ADVISORY SERVICES • IFC client Guy Carpenter designed product to protect cotton crops against excess rain, drought and cold temperatures COVERAGE • Insured $333,000 in inputs for cotton farmers in the Monapo district in 2013. OUTCOMES • Received a payout of $153k due to drought during the flowering period. • Mozambique Cotton Institute used the payout to pay the premium for following year Guy CarpenterAdvisory Product design 5 CONFIDENTIAL