Beyond control? Insurance helps manage weather

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Financial education is an essential part of smallholder empowerment. Our Foundation combines this with, for example, awareness of insurance’s key role in managing farm risks. A recent workshop laid a strong basis for further steps in Cambodia. 

Smallholder agriculture in Cambodia is highly vulnerable to weather extremes. Climate change poses a huge threat. Risk management plays a central role in farmers’ financial decisions. The Cambodian government has declared agricultural insurance part of its policy for growth. «Insurance is one of the most promising risk mitigation tools for farmers», comments Srini Rao from our Insurance team. He was one of the workshop speakers. «Insurance helps smallholders cope with losses from adverse weather and other events beyond their control.»

So far, most financial institutions and insurance companies in Cambodia have been reluctant to engage in agricultural insurance. Two notable exceptions are FORTE Insurance and AMK Microfinance. Both took leading parts in the workshop. In their opening remarks, the companies’ respective CEOs, Youk Chamroeunrith and Kea Borann, explained the importance of crop insurance for Cambodia’s farmers. They were joined by Dr. Seng Vang, Director of the Department of Agricultural Land Resources Management. All three expressed their firm commitment to further progress here.    

«We understand the sector’s general reluctance, however, which we also see in other countries», says our Insurance head Olga Speckhardt. «There are several reasons for the lack of interest. They include limited awareness and knowledge of agricultural insurance, technical challenges in policy design and implementation, plus poor historical weather and yield data. Another current barrier is inadequate financial literacy among farmers.» To tackle these problems in Cambodia, our Foundation has launched a long-term ‘Crop Insurance Inclusive Market Development Program’ (CIIMDP). It aims to provide broad support for smallholders and the institutions that could protect them.  

A further workshop speaker was Sophary Long, our Project Manager in Cambodia. «The first CIIMDP phase was a feasibility study in 2018 and 2019», she explains. «That ran in collaboration with FORTE, AMK and Rohat Agro-Tech. The Swiss Capacity Building Facility (SCBF) provided financial support. The second phase till 2022 now focuses on financial education.» The main goals are to create awareness of financial risk management and the importance of crop insurance, as well as building the technical capacity of FORTE, AMK and other potential stakeholders. The December 2020 workshop was a step in this process. Vannarith Chhay, the program’s financial education consultant, presented details. He also described his work with CIIMDP partners to develop video and training materials.

Guest speaker Dr. Chharom Chin (RIICE*) declared: «The impact of climate change – particularly more uneven rainfall – has already driven many Cambodian farmers into other sectors.» Srini Rao emphasizes the rationale behind CIIMDP: «Launching this program is an important step in improving smallholders’ livelihoods and encouraging them to continue investing in agriculture. SFSA and its partners want to be part of farmers’ response to climate change. Good partnership for and with smallholders is critical!»

* Remote sensing-based Information and Insurance for Crops in emerging Economies (website)