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A system of drought insurance for poverty alleviation in rural areas

Published by:
Publication date
Number of Pages
Type of Publication:
Articles & Journals
Focus Region:
Latin America & the Caribbean
Focus Topic:
Climate / Weather / Environment
Type of Risk:
Weather & Climate related
Natural disasters
Type of Risk Managment Option:
Risk transfer
J. D. Nieto, S. Cook, Mark Lundy, Myles Fisher, Diego Sanchez, Edward Guevar

This is a feasibility study of a practical method of drought insurance that is self-sustaining and ready to use by poor farmers, NGOs or other development organizations. Few farmers knew how insurance works or had experience with it, but quickly grasped the concept and became enthusiastic. They understood the concept that premium prices would depend on their location, that is, according to the risk. Farmers provided valuable feedback on administrative and operational aspects of such a scheme. Most farmers found the possibility that the MFOs would be local agents an attractive idea. Crop insurance combined with micro finance has the potential to help poor smallholder farmers break out of the poverty trap. But these products were denied to many people because lack of information and infrastructure provided no information on which to formulate them. The work we describe here provides the scientific tools that allow the expansion of micro finance and insurance to people who have hitherto been denied them.