Improving Weather Risk Management in West Africa: Evaluation of Remote Sensing for Index Insurance

The Weather Risk Management Facility (WRMF)1 is a joint initiative between two United Nations agencies, the International Fund for Agricultural Development (IFAD) and the World Food Programme (WFP). It has been working to address the challenges weather risk (particularly drought) poses for smallholders producing crops in rural areas. One way the WRMF does this is by developing and supporting innovative weather and climate risk management tools – including index insurance – that improve rural livelihoods and reduce hunger. Launched in 2008 with the support of the Bill and Melinda Gates Foundation, the WRMF draws on IFAD’s experience in rural finance and on WFP’s expertise in disaster-risk reduction and management.
Building on lessons learned from carrying out pilots and research, the WRMF identified key constraints and success factors in the uptake, sustainability and scalability of index insurance2. Index insurance offers structural opportunities where, as part of a larger package of risk management strategies and services, it can be delivered through risk aggregators, such as agricultural finance providers, input suppliers and contract farming organizations. Indexation can also form a basis for risk financing and insurance for governments, relief agencies, at a more aggregated level.
This latest project, ‘Improving Weather Risk Management in West Africa: Evaluation of Remote Sensing for Index Insurance’, is designed to test the feasibility of index implementation for poor rural smallholders using innovative remote sensing technology. The project will address implementation needs, and research and evaluate methodologies, focusing on selected test locations in West Africa (e.g. Senegal). The rationale for this project is that conventional weather index insurance (using weather stations) and area yield index insurance (using crop yield data), suffer from significant constraints, such as lack of appropriate weather station coverage and adequate yield information. In many cases these constraints represent a severe limitation to the introduction and scaling up of insurance products – both traditional crop and indexed insurance. By removing some of the obstacles encountered by such approaches, and despite a different set of technical, organizational and financial challenges, remote sensing may offer new opportunities for development of new insurance instruments for indexation. The specific goal of this project is to research and develop sustainable index insurance products for smallholder farmers who are producing crops in drought-prone areas of developing countries. Any successfully piloted methodologies could then feed into existing IFAD and WFP programmes such as R43 and other ongoing operations.
This briefing note is primarily written for organizations, research centres, and firms which are involved in remote sensing and agricultural productivity monitoring, to explain about the project and the way in which the WRMF hopes to engage with them during phase 2 and potentially beyond.
Consultancy project. Member of the Evaluation Committee.