InsuResilience Solutions Fund supports the development of a new index-based insurance product for vulnerable maize and rice farmers in several Indonesian regencies.
The archipelagic state of Indonesia is one of the most vulnerable countries to natural hazards with high exposure to extreme weather events like earthquake, tsunami and cyclones. Further threat to farmers stems from prolonged periods of severe drought – as a recent example, in 2019 more than 50 million people were affected by a long-running drought with emergencies declared in numerous provinces.
Although the country experiences rapid economic growth, the livelihood of smallholder farmers, who represent the majority of the agriculture workforce, remains low due to limited access to capital and agricultural technologies, limited knowledge of proper agricultural practices and access to farming risk management tools, among other reasons, leaving them highly exposed and vulnerable to climate risk related shocks.
In order to contribute to the objective of increasing the smallholder farmers’ resilience, the InsuResilience Solutions Fund (ISF), managed by the Frankfurt School of Finance & Management (FS), and financed by KfW Development Bank on behalf of the German Government, signed a grant agreement with PT Mandiri AXA General Insurance (MAGI), the joint venture company between PT Bank Mandiri (Persero), Tbk and AXA ASIA; AXA Emerging Customers (AXA S.A.), AXA Climate, acting as reinsurance partner and broker, PT Jiva Agriculture (Jiva), a subsidiary of high-quality input provider OLAM providing high-quality inputs, advisory services, access to input loans and sell offtakes, and Yayasan Agri Sustineri Indonesia (YASI), a local non-profit organisation working on social and humanitarian matters, particularly focusing on promoting sustainable agriculture and improving the livelihoods and welfare of Indonesian smallholder farmers, and within the project responsible for capacity building and training of distribution channels. Based on the agreement ISF will co-fund the design and refinement of the climate risk insurance product, the setup of distribution channels, training of distribution partners, the collection of farmers’ field data, the development of marketing materials and awareness raising activities.
Between 2016 and 2019, the government of Indonesia offered an indemnity-based insurance product for rice with damage being estimated by loss adjusters on individual field level leading to delayed claims processes. Within the project period, only 3.8% of rice fields were covered by the governmental insurance scheme. With this project, the Project Partners aim to support the development of the national market responding to the Ministry of National Development Planning’s appeal to spur commercialised agricultural insurance. The insurance product will be offered through Jiva’s platform where insurance will be bundled with loans, through agents as last mile delivery, through MAGI’s microfinance institutions partners offering the insurance bundled with working capital credit and access to inputs and offtakers, and through YASI’s supported farmers’ hubs “Pancer Tani”. The project will start in the regencies of Gowa, Jeneponto, Bantaeng, Bone and Takalar, Karawang, and Indramayu with the potential be upscaled to cover more regions in the future.
Managed by Frankfurt School
GRMA hosted by ISF
