Food security is a critical phenomenon amongst developing countries. Most nations are now placing greater emphasis on crop insurance as a means of managing farming risk and enhancing food security. With Southern Africa having been hit by weather hazards such as floods and drought over the past few decades and its agricultural output continuing its downward plunge, the paper explores the relevancy of crop insurance in enhancing food security and facilitating agricultural productivity in Zimbabwe.

Fifty-five year old Niyitegeka Veneranda lives in rural Rwanda. She and her husband are parents to seven children and grandparents to five. They farm less than a hectare of their own land, yet she has been able to build a small house, feed her family, and send her last three children to school. She expanded her rice production recently with a loan from a local bank made possible through agricultural insurance, and plans to expand her acreage with another loan next year.

Unlike conventional insurance, which indemnifies policyholders for verifiable production losses arising from multiple perils, index insurance indemnifies policyholders based on the observed value of a specified “index” or some other closely related variable that is highly correlated with losses. Index insurance exhibits lower transaction costs than conventional insurance, potentially making it more affordable to the poor in the developing world. However, it also offers less effective individual risk protection. This article provides a review of recent theoretical and empirical research on index insurance for developing countries and summarizes lessons learned from index insurance projects implemented in the developing world since 2000

Thousands of farmers in Moiben, Eldoret have always known that drought comes after every 10 years. But every once in a while the pattern is broken and they are caught off-guard as was the case in 1984 and in 2009. However, in the midst of the dark clouds of hunger, there was a silver lining that got them smiling last year— a crop insurance product that promised to change their fortunes. This is a first for small-scale farmers in Kenya who produce more than 70 per cent of the country’s food output.

Risk characterizes life for many of the world’s poorest households. They are more likely to be located in environments where livelihoods are highly susceptible to weather and price variability and where health risks are pervasive. When these risks are uninsured, they not only reduce the current welfare of poor rural households, but also threaten future income growth and thus perpetuate poverty. Reducing the risks faced by poor households, and enabling poor households to better deal with bad events when they do occur, is essential to improving their welfare in the short run and their opportunities for income growth in the long run. This note draws on the briefs published in the IFPRI’s 2020 Focus “Innovations in Insuring the Poor” and other work, to examine the potential for agricultural insurance, and in particular index insurance, as a risk management tool for rural households in sub-Saharan Africa.