Enhancing Resilience of Smallholder Farmers in Southern Malawi through a Risk Layering Approach for Managing Climate-related Risks

As a consequence of climate change, farms in Malawi are severely affected and vulnerable, and underscore the urgent need to build soil health and strengthen climate resilience. To protect these farmers from climate-related hazards, the InsuResilience Solutions Fund (ISF) has signed a grant agreement to co-fund the development of a climate risk insurance solution. This initiative is being carried out in partnership with Opportunity International Malawi, MicroInsurance Centre at Milliman, and CelsiusPro AG.

In Southern Malawi, droughts, floods, and cyclones are severely impacting smallholder farmers, presenting two interconnected challenges: financial institutions (FIs) partnered with Opportunity International Malawi are hesitant to offer loans to smallholder farmers, who in turn, struggle to repay existing loans and meet their financial needs due to crop losses, making it difficult for them to access new credit to rebuild their livelihoods after disasters.

To tackle these challenges, the ISF has partnered with Opportunity International Malawi, the project leader, alongside MicroInsurance Centre at Milliman, serving as a finance and insurance consultant, and CelsiusPro AG, an Insurtech company. The project aims to protect FIs from less frequent, large-scale weather events while adapting an existing micro-insurance product to directly safeguard smallholder farmers from more frequent, localized climate risks.

The primary goal of this initiative is to enhance the economic and climate resilience of smallholder farmers in Malawi by improving their access to financial services, including insurance and credit. This will be achieved by bolstering the financial stability of Opportunity International Malawi’s network of FI partners in the aftermath of climate-related disasters, ensuring they can continue lending to farmers. Additionally, the project will protect smallholder farmers from the economic impacts of flooding, excessive rainfall, and drought while providing financial management training and supporting the implementation of regenerative agricultural practices on heavily depleted soils.