MICROCAPITAL BRIEF: Government of Madagascar, IFC, Local Insurers Partner on Agricultural Insurance, Seeking to Lower Risk of Lending to Farmers

The International Finance Corporation (IFC), a member of the World Bank Group, recently announced a partnership with the government of Madagascar to boost farmers’ access to insurance that protects their crops from climate-related disasters. The project will engage Malagasy insurance companies to create new products targeted at farmers to protect them from risks such as drought, cyclones, pest invasions and flooding. One of the goals is for the insurance to boost the confidence of lenders, encouraging them to finance farmer purchases that will, in turn, increase farm productivity and income.

Marcelle Ayo, IFC’s Country Manager for Madagascar, said, “smallholder farmers are often on the front lines of risk, and they deserve insurance programs specifically targeted to meet their needs. Agricultural insurance can help them enjoy a more predictable and stable cash flow, enabling them to repay loans and improve credit worthiness, boost production, and build more resilience against natural disasters and other shocks.”

The project is supported by the Global Index Insurance Facility (GIIF), which is managed by the World Bank Group and funded by the African, Caribbean and Pacific (ACP) Group of States; the EU’s European Commission; and the governments of Germany, Japan and the Netherlands. The goal of GIIF is to “develop effective and sustainable markets for agriculture insurance” to help “smallholder farmers and microentrepreneurs gain better access to finance, manage financial losses, and protect their livelihoods against more frequent and more severe weather events.” Over ten years, the facility has helped 23 million people access insurance in 30 countries.

Founded in 1956, IFC offers loans, equity investments, advisory services and technical assistance to private companies with the intent of alleviating poverty and promoting open and competitive markets in developing countries. During the year ending June 2020, IFC reported total disbursements of USD 26 billion.

The World Bank Group is a multilateral organization whose goal is “to end extreme poverty and promote shared prosperity in a sustainable way.” As of 2021, it has 189 member nations. The group encompasses: (1) the International Bank for Reconstruction and Development and the International Development Association, which make up the World Bank; (2) IFC; (3) the Multilateral Investment Guarantee Agency; and (4) the International Centre for Settlement of Investment Disputes. During the 12 months ending June 2020, the World Bank Group disbursed funds totaling USD 54 billion.

By Sophie Fiala, Research Associate

Sources and Additional Resources

IFC press release
https://pressroom.ifc.org/all/pages/PressDetail.aspx?ID=26333

World Bank Group homepage
https://www.worldbank.org/

GIIF webpage
https://www.ifc.org/wps/wcm/connect/industry_ext_content/ifc_external_corporate_site/financial+institutions/priorities/access_essential+financial+services/global+index+insurance+facility

European Commission homepage
https://ec.europa.eu/

ACP homepage
http://www.acp.int/

Netherlands Ministry of Foreign Affairs homepage
https://www.government.nl/ministries/ministry-of-foreign-affairs

German Federal Ministry for Economic Cooperation and Development homepage
https://www.bmz.de/

Japan Ministry of Finance homepage
https://www.mof.go.jp/

Previous MicroCapital article on IFC
https://www.microcapital.org/microcapital-brief-insurtech-pasarpolis-of-indonesia-raises-5m-in-equity-from-international-finance-corporation-ifc-for-microinsurance/

Previous MicroCapital article on World Bank Group
https://www.microcapital.org/microcapital-brief-laos-launches-40m-msme-pandemic-relief-project-with-world-bank-loan-proceeds/