Integrating Seasonal Forecasts and Insurance for Adaptation Among Subsistence Farmers: The Case of Malawi

30 Pages Posted: 20 Apr 2016

See all articles by Pablo Suarez

Pablo Suarez

Boston University - Department of Geography

James W. Hansen

Columbia University

Miguel Carriquiry

Iowa State University - Department of Economics

Ashok K. Mishra

Louisiana State University Agcenter and Louisiana State University

Daniel Osgood

Columbia University

Date Written: June 1, 2008

Abstract

Climate variability poses a severe threat to subsistence farmers in southern Africa. Two different approaches have emerged in recent years to address these threats: the use of seasonal precipitation forecasts for risk reduction (for example, choosing seed varieties that can perform well for expected rainfall conditions), and the use of innovative financial instruments for risk sharing (for example, index-based weather insurance bundled to microcredit for agricultural inputs). So far these two approaches have remained entirely separated. This paper explores the integration of seasonal forecasts into an ongoing pilot insurance scheme for smallholder farmers in Malawi. The authors propose a model that adjusts the amount of high-yield agricultural inputs given to farmers to favorable or unfavorable rainfall conditions expected for the season. Simulation results - combining climatic, agricultural, and financial models - indicate that this approach substantially increases production in La Niña years (when droughts are very unlikely for the study area), and reduces losses in El Niño years (when insufficient rainfall often damages crops). Cumulative gross revenues are more than twice as large for the proposed scheme, given modeling assumptions. The resulting accumulation of wealth can reduce long-term vulnerability to drought for participating farmers. Conclusions highlight the potential of this approach for adaptation to climate variability and change in southern Africa.

Keywords: Hazard Risk Management, Debt Markets, Rural Poverty Reduction, Banks & Banking Reform

Suggested Citation

Suarez, Pablo and Hansen, James W. and Carriquiry, Miguel and Mishra, Ashok K. and Osgood, Daniel, Integrating Seasonal Forecasts and Insurance for Adaptation Among Subsistence Farmers: The Case of Malawi (June 1, 2008). World Bank Policy Research Working Paper Series, Vol. , pp. -, 2008. Available at SSRN: https://ssrn.com/abstract=1149603

Pablo Suarez (Contact Author)

Boston University - Department of Geography ( email )

United States

James W. Hansen

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Miguel Carriquiry

Iowa State University - Department of Economics ( email )

260 Heady Hall
Ames, IA 50011
United States
(515) 294-0670 (Phone)

HOME PAGE: http://www.card.iastate.edu/facstaff/profile.aspx?id=46

Ashok K. Mishra

Louisiana State University Agcenter and Louisiana State University ( email )

211 Woodin Hall
Baton Rouge, LA 70803
United States
2258718 (Phone)

HOME PAGE: http://www.lsuagcenter.com/en/communications/authors/AMishra.htm

Daniel Osgood

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

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