Posted on Nov 30, 2010 by Sergio Ulloa
The International Finance Corporation (IFC) - a member of the World Bank Group - has awarded a US$4.1 million (€3.12 million) grant to support the provision of microinsurance in Eastern Africa. The grant will be awarded over the next three years to help 35,000 farmers and 5,000 livestock herders in Kenya and Rwanda.
The grants will be used to finance advisory services, building and infrastructure development and assistance to local insurance companies in the provision of index-based insurance products.
The agreement between the IFC and the regional grant partners is designed to expand access to insurance for Kenyan and Rwandan farmers and livestock herders in order to provide them with protection for their animals, crops and livelihoods against natural disasters and weather-related risks.
The IFC led programme - through the Global Index Insurance Facility (GIIF) - was established in 2009 to help in the development of index-linked insurance facilities in countries which currently have limited insurance resources available. The IFC grant, totaling roughly US$4.1 million (€3.12 million), will be shared between three schemes which include: MicroEnsure weather index insurance project in Rwanda; the Syngenta Foundation for Sustainable Agriculture/UAP Insurance weather index insurance initiative in Kenya and the International Livestock Research Institute (ILRI) Livestock index insurance project in northern Kenya.
The expected breakdown of the grant will see the Syngenta Foundation for Sustainable Agriculture receiving up to US$2.4 million (€1.8 million), which is planned to assist 20,000 farmers in Kenya with insurance protection over the next three years. US$154,000 (€117,540) of the IFC grant will be for the ILRI to help roughly 5,000 households in northern Kenya over the next two years and up to US$1.6 million (€1.2 million) will be for MicroEnsure to cover 15,000 farmers over the next three years in Rwanda.
IFC's director for Eastern and Southern Africa, Jean Philippe Prosper said: "These partnerships highlight IFC's commitment to expanding insurance and other financial products where they are needed most in Africa. The Global Index Insurance Facility will facilitate farmers' access to credit, leading to increased productivity, improved livelihoods and greater food security. We are grateful to the donors that have generously provided funding and to our partners for supporting this programme."
The establishment of the GIIF is designed to aid the development of local insurance companies and create capacity to provide index-based insurance products. Index-based insurance is designed to protect against catastrophic events taking into account the severity of the events such as droughts, flooding and wind storms and the damage they can cause. The significance of the form of index-linked insurance products proposed is that it will enable the verification of claims on a large scale rather than on an individual basis. This will lower transaction costs, making products and services more accessible in rural and remote regions.
The first donor to commit to the GIIF Trust Fund was the European Union (EU) which donated US$32 million(€24.5 million). Additional donations have been received from Japan's Ministry of Finance with an initial offering of US$2 million (€1.5 million) and the Dutch Ministry of Foreign Affairs; these funds have been used to finance the initial project and establish the facilities required.
The IFC is the largest global development institution founded to focus on private sector involvement in developing countries. The IFC looks at ways to create opportunities for people to escape poverty and improve their lives. The global institution provides capital for businesses to assist employment and supply needed services by using funding from sponsoring parties. The IFC will also offer advisory services to ensure projects are developed effectively.