DEVELOPMENT AN IMPLEMENTABLE CROP WEATHER-BASED INDEX CROP INSURANCE SCHEME FOR THE SHIRE RIVER BASIN

The Shire River Basin covers over 3.1 million ha and directly or indirectly influences the livelihoods of over 5.5 million people in the southern region of Malawi. The basin is of critical economic importance: it is the source of over 98% of the country’s power generating capacity, supplies water to major urban centres such as Blantyre and Limbe, supports a locally significant artisanal fishery, and supplies irrigation water for valuable crops. Malawi’s economy is based primarily on agriculture, dominated by subsistence and rain-fed food production systems that are greatly challenged by land degradation and declining soil fertility.
Although majority of the population depends on agriculture, it has failed to drive economic growth because of a number key constraints. The agricultural sector is dominated by subsistence rain-fed food production systems which are challenged by land degradation with declining soil fertility. Unfortunately, not many smallholder farmers can access micro-finance or credit needed to procure. agricultural inputs Studies have shown that less than half (48%) of all households in the Shire River basin had ever accessed any form of micro credit The situation was worse for women headed households.
This situation is exacerbated by the higher than normal riskiness of agricultural production . The region is prone to extreme weather conditions with frequent droughts and flooding, subjecting the rain-fed agriculture to serious fluctuations in yields and the population to severe uncertainties in food security. Studies showed a 62% chance that an average household will experience a crop failure at least once every five years. Over a third of households experienced crop failure for three or more years within the last five years. This is expected to increase as a result of climate change.
Weather-index based insurance has been tried in many countries, including Malawi, as a back up to for loans. At a more localized level, Malawi piloted the “weather-based crop insurance index scheme” in 2005/2006 season in the districts of Lilongwe, Kasungu, Nkhotakota and Mchinji. It aimed at helping farmers to manage weather related risks by transferring the risks to an external agent (formal insurance companies) upon payment of a premium. Farmers signed a contract to back up the loans, whereby farmers received loans to purchase farm inputs linked to this insurance package. Technical experts and cooperating partners assisted to draw contracts and to establish a “Drought Index” to determine the level when payment by insurance would be triggered for a given geographical area, as determined by a weather station. Primarily, this first programme was piloted for maize and groundnuts however, this was discontinued after two years due a number of problems.
In 2007, this program started working with tobacco buyers and farmers, differing from the first pilot in that the bank, the farmers and the contract farming operations shared the cost of the insurance. However, a roll out of the initial scheme faced the following challenges:
¨ The insurance scheme did not make any provisions to protect the farmers against food insecurity during bad years due to their choice of crop.
¨ There was inadequate understanding by the farmers
¨ The scheme also lacked a holistic approach in its design and implementation.
¨ The inadequate regulatory and institutional frameworks.
¨ The scheme was also faced with inaccurate rainfall data
In order to address the above issues, Government and UNDP/GEF developed the Private Public Sector Partnership Project on Sustainable Land Management (SLM Project) in the Shire River Basin with the goal being the provision of the basis for economic development, food security and sustainable livelihoods while restoring the ecological integrity of the River shire Basin”.
Specifically, the objective is: “To reduce land degradation in the Shire River Basin through improved institutional, policy and Payment for Ecosystem Services (PES) arrangements.” The objectives will be achieved through 4 key outcomes:
¨ Policy and institutional arrangement for basin-wide SLM, including preparatory work for the establishment of the River Shire Development Authority
¨ Private public partnerships providing financial incentives for SLM
¨ Improving knowledge and skills at all levels to support SLM;
¨ Crop insurance providing the basis for increased access to credits as well as increased use of up to date weather information in decision making for improved livelihood systems.
The project is focussing on the middle and lower Shire river basin. Lessons learnt will be up-scaled to the entire Basin through the planned River Shire Development Authority, which is to be developed through the project.
This four year programme is coordinated by the Environmental Affairs Department (EAD) of the Ministry Natural Resources, Energy & Environment. Implementation is taking place in Blantyre, Neno, Balaka and Mwanza districts involving local authorities and stakeholders, as well as the departments of forestry, energy, Climate Change & Meteorological Services, Land Resources Conservation, Extension, Water and Planning. Linkages with the private such as ESCOM, Blantyre Water Board, Southern Region Water Board, as well as NGOs will be established as well.

Duties and Responsibilities

The present assignment has been initiated by EAD in order to assist in developing an appropriate Weather Based Crop Insurance Scheme that should benefit smallholder farmers in the Shire River Basin not only to access loans but also provide the farmers security from the fluctuations in yields (production risks like loss of income and food) due to climate change and become an incentive for investing in SLM.
To meet that objective, the consultant shall undertake the following tasks, grouped into two main categories:
a) Conduct a review of the past and existing crop insurance schemes to identify best practices, as well as weakness that should be avoided in the proposed Shire River basin crop insurance pilot scheme. This review and synthesis of these lessons learnt and best practices should clarify on the following:
¨ Standardized procedures in running the scheme for smallholder farmers
¨ Objectives of such schemes and sequential steps to follow in the implementation of the scheme
¨ How to improve the farmers’ understanding of the concept of insurance
¨ Details on logistical arrangement for an effective implementation of the scheme
¨ Roles, responsibilities and accountabilities for each collaborating institution, including farmers (groups and individuals).
¨ An appropriate institutional framework / mechanisms to guide the implementation for the Weather Index based crop insurance i.e defining rules, procedures, by-laws and conflict resolution mechanisms etc.
¨ Computation and compensation conditions how farmers can improve their understanding and their decision making about the scheme based on informed choices.
¨ Data requirements that would ensure that the right beneficiaries are compensated. The SRB has a highly variable topography that generates micro-climates, necessitating a more dense coverage of rainfall data.
¨ How to improve mutual trust amongst the different players, particularly on the part of farmers.
¨ Review experiences in terms of what types of risks should be covered for weather index based insurance to be effective and acceptable?
b) Redesign a new weather index based crop insurance scheme for the basin that meet the best possible conditions for success based on the review and the synthesis report above. As a minimum, proposed scheme must have:
¨ Well defined and clear Goals, Objectives and expected outputs with the types of production risks are to be covered,
¨ A clear monitoring and evaluation plan and how to improve on the data collection and use.
¨ A clear choice of crops to be insured and criteria for choice of those crops
¨ A clear optimal land size under cultivation per crop per farmer or per farmer group
¨ A clear strategy as to how to protect farmers against food insecurity during bad years.
¨ Capacity building requirements for both farmers and field staffs on the understanding of the scheme, implementation and conditions of the insurance.
¨ The scheme must not be a “stand alone” project, rather it must be part of a more comprehensive current and future development and hazard mitigation efforts in the basin.
¨ The scheme must be seen to be demand driven, with a clear assessment of the willingness to participate in the scheme, and acceptance to the terms and conditions of the scheme; and that there is demonstrated interest to innovate on farming activities
¨ Clarify the roles and responsibilities of collaborating partners as well as the linkages between farmers, insurance and credit providers and how they can be strengthened.
¨ Determine the human and financial resources required to implement such a scheme
¨ Explore the feasibility of including floods and excessive rainfall as an integral part of the insurance scheme. This is important because Shire River Basin is a low-lying landscape that is prone to regular flooding.

Competencies

Results Orientation
¨ Extensive knowledge about community development in Africa
¨ Extensive knowledge about micro-credit and weather insurance schemes
¨ Skills in facilitation and coordination, with strong communication and inter-personal skills
¨ Sound judgment and strong client and results orientation;
¨ Strong analytical and report writing abilities required

Required Skills and Experience

The review will be undertaken by a team of consultants with the following qualifications and Experience:
¨ Education: Advanced university degree (Masters or higher level) in Agriculture Economy or other relevant studies;
¨ Experience: Minimum of 10 years professional experience in agriculture and risk management
¨ Experience in Agriculture Weather Based Index Insurance, with special attention on developing local insurance schemes.

UNDP is committed to achieving workforce diversity in terms of gender, nationality and culture. Individuals from minority groups, indigenous groups and persons with disabilities are equally encouraged to apply. All applications will be treated with the strictest confidence.

DEVELOPMENT AN IMPLEMENTABLE CROP WEATHER-BASED INDEX CROP INSURANCE SCHEME FOR THE SHIRE RIVER BASIN
DEVELOPMENT AN IMPLEMENTABLE CROP WEATHER-BASED INDEX CROP INSURANCE SCHEME FOR THE SHIRE RIVER BASIN DEVELOPMENT AN IMPLEMENTABLE CROP WEATHER-BASED INDEX CROP INSURANCE SCHEME FOR THE SHIRE RIVER BASIN Reviewed by Unknown on 12:17:00 PM Rating: 5

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