Weather Index-based Insurance as an Effective and Sustainable Climate Change Adaptation Strategy for Smallholder Farmers in Malawi

Abstract

The impacts of climate change pose a significant threat to the livelihoods of smallholder farmers in developing countries. This is especially true in rural Malawi where farmers rely on rainfed crops as their major source of income. To help low income farmers respond to climate change, development agencies and international financial institutions have proposed a range of agricultural insurance products. While there are numerous insurance strategies, in recent years, weather index-based insurance has become an increasingly attractive option due to low-administration costs and reduction of moral hazard. This paper pulls from empirical evidence of existing weather index-based insurance research along with primary data collected through a case study from Malawi to explore whether or not weather index-based insurance is an effective and sustainable climate change adaptation strategy for women and men smallholder farmers in Malawi. This is done by examining its enrollment rates and scalability, its effectiveness in meeting the needs of women and men smallholder farmers, and if the weather 3 index-based insurance coverage is leading to improved agricultural practises and use of improved inputs and technologies. This paper finds that a serious and extensive investment into a gender responsive, well designed, robust but flexible weather index-based insurance product, in an enabling environment, could be a much needed bridge to sustainable climate change resilience for smallholder men and women farmers in Malawi.