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New non-governmental climate insurance programme for smallholders
Over 690,000 families totalling up to four million people living in six low-income countries stand to benefit from a new climate insurance programme called African and Asian Resilience in Disaster Insurance Scheme (ARDIS).
ARDIS was launched in January 2018 by VisionFund International, World Vision’s microfinance arm and Global Parametrics, a new venture funded by the United Kingdom’s Department for International Development (DFID) and by the InsuResilience Investment Fund, set up by the German development bank KfW and managed by Swiss-based impact investment manager BlueOrchard Finance.
Financing for the initial preparation and assessment required to implement the programme came from the Rockefeller Foundation and FMO, the Dutch development bank.
ARDIS will increase access to finance and provide post-disaster recovery lending to rural families and smallholder farmers who live below the poverty line and participate in VisionFund’s microfinance network.
In its first year, ARDIS protection will be provided to VisionFund’s clients in Kenya, Malawi, Mali, Zambia, Cambodia and Myanmar, of which around 80 per cent are women. This programme will effectively meet one per cent of the G7 goal to increase access for up to 400 million uninsured people in developing countries to insurance products that protect against climate risk.
Disbursing out loans immediately
The ARDIS programme allows beneficiaries to receive swift access to much-needed credit required by farmers and small businesses after a climate shock. Recovery lending, essentially small loans with special terms, is provided through VisionFund’s microfinance institutions.
Such loans are disbursed immediately during and after disasters to help clients maintain or restart economic activities, complementing relief aid which is required for urgent survival needs in disaster situations.
Fast recovery lending to the client is enabled by the provision of liquidity to the microfinance institution in order to bolster its resources to cope with increased demand. Global Parametrics’ advanced climate-based data modelling verifies the climate event and triggers access to both contingent liquidity and risk capital by VisionFund’s microfinance institutions.
This injection of funds to the microfinance institutions restores their balance sheets, thus ensuring business continuity or enhancement of operations and services despite the common disruptions created by such calamities.
For example, typically in disasters when clients cannot repay loans and there is higher demand for lending, microfinance institutions suffer a reduction in the amount of capital they hold and are therefore required to curtail their lending.
(VisionFund International/Global Parametrics/ile)