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The role of Malawi Meteorological Service in Crop Weather Insurance Adams Chavula Agriculture Meteorologist The role of Malawi Meteorological Service in Crop Weather Insurance Adams Chavula Agriculture Meteorologist Malawi Meteorological Services PO Box 1808 BLANTYRE, MALAWI Email: [email protected] com Expert Meeting on Requirements of the Catastrophe Insurance and Weather Risk Management Markets for National Meteorological and Hydrological Services 5 -7 December 2007, WMO Headquarters, Geneva, Switzerland

PRESENTATION OUTLINE Background Information about Malawi l The Malawi Meteorological Service l Opportunities and PRESENTATION OUTLINE Background Information about Malawi l The Malawi Meteorological Service l Opportunities and Challenges l Malawi Crop Insurance Pilot Project l Lessons Learned l Way Forward l 2 3/18/2018

Background Information about Malawi l l l 3 85% of the people in Malawi Background Information about Malawi l l l 3 85% of the people in Malawi live in rural areas, most of whom depend on agriculture for a living; The majority of farmers are smallholders, cultivating areas of 1 ha or less. Over 90% of crop production is rain-fed, taking place during a single rainy season lasting from November to April. Rainfall during this period tends to be highly erratic Drought is a recurrent problem, often causing widespread crop failure The main food crop is maize, while tobacco and groundnut are the two principal cash crops 3/18/2018

The Malawi Met. Service: MISSION STATEMENT l l 4 To provide reliable, responsive and The Malawi Met. Service: MISSION STATEMENT l l 4 To provide reliable, responsive and high quality weather and climate services to meet national, regional and international obligations through timely dissemination of accurate and up to date data and information for socio-economic development Motto: Be wise, be weather-wise 3/18/2018

The Malawi Met. Service • Has 23 full weather stations including Tembwe and Balaka The Malawi Met. Service • Has 23 full weather stations including Tembwe and Balaka AWS • Supported by over 700 rainfall and subsidiary stations operated by various organizations including Mo. AFS • However, there is still need to upgrade and expand to all districts • Data collection thru phones, email, radios, teleprinters • Dissemination thru Newspapers, Radio, TV, Website, email, Fax, phone, personal contact, meetings 5 3/18/2018

The Malawi Met. Service: l l l 6 l Got involved in the crop The Malawi Met. Service: l l l 6 l Got involved in the crop weather insurance pilot project two years ago as a provider of weather and climate data that is an input into the crop weather insurance index. The crop weather insurance pilot project is a practical example of the use of weather information to benefit the rural poor, and is a step in realizing the Millennium Goals. 3/18/2018

Opportunities and Challenges l l l 7 Enormous volumes of weather and climate data Opportunities and Challenges l l l 7 Enormous volumes of weather and climate data exist in Malawi Data collection started many years ago Rainfall records date back to 1891 for some stations. Data of other parameters such as temperature, humidity and wind cover more than 50 years. This data is of excellent quality, satisfying a key prerequisite for risk transfer. This is useful data, but it can be even more useful if data can be transformed into applicable derivatives. 3/18/2018

Opportunities and Challenges l l 8 Traditional insurance products are largely underdeveloped – Crop Opportunities and Challenges l l 8 Traditional insurance products are largely underdeveloped – Crop Insurance can be very expensive to administer –Individual Crop yields and field inspections needed – Small size of the farms Malawi Meteorological Service has an operational national maize production forecasting model which can be adapted for reinsurance 3/18/2018

Difference Outputs from Malawi Meteorological Office’s national maize production forecasting model Average 9 2005 Difference Outputs from Malawi Meteorological Office’s national maize production forecasting model Average 9 2005 index 3/18/2018

Opportunities and Challenges l l 10 Bad news: – Thin network of operational weather Opportunities and Challenges l l 10 Bad news: – Thin network of operational weather stations – Lack of weather data in Crop growing areas Good news: – With data availability, investment in infrastructure can compliment the key requirements to operate a macro Insurance project – A simple automated station with satellite communication capabilities is worth $12, 000) 3/18/2018

What is weather insurance? l l 11 Financial protection based on the performance of What is weather insurance? l l 11 Financial protection based on the performance of a specified index in relation to a specified trigger Offers protection against uncertain costs or revenues that result from volume volatility – Farmers are compensated against unfavorable weather fluctuations that impact physical volumes produced 3/18/2018

Malawi Crop Weather Insurance Pilot Project l l Malawi is one of the countries Malawi Crop Weather Insurance Pilot Project l l Malawi is one of the countries piloting the methodology l Due to high levels of poverty, the farmers were not credit worth and hence they could not access loans to purchase inputs. l 12 Weather based index insurance - recognised as one of the methodologies that can be used sustain livelihoods and reduce poverty as part of the MDGs. The insurance helps farmers obtain financing necessary to obtain certified seeds, which produce increased yields and revenues as well as greater resistance to disease 3/18/2018

PILOT DETAILS Farmers NASFAM smallholder farmers organized in clubs Typically 10 -20 members with PILOT DETAILS Farmers NASFAM smallholder farmers organized in clubs Typically 10 -20 members with joint liability for loan repayment Received Groundnut and Maize seed within 20 km of a Class A Weather Station Live l Five stations in central Malawi are used for the pilot l Chitedze l Kamuzu International Airport l Kasungu l Tembwe l Nkhotakota l 13 3/18/2018

Other stakeholders l l Insurers: Insurance Association of Malawi Financiers: Opportunity International Bank of Other stakeholders l l Insurers: Insurance Association of Malawi Financiers: Opportunity International Bank of Malawi Rural Finance Corporation l Seed provider: NASFAM from supplier Seed Co. l Supplier of Climate and Weather data Malawi Meteorological Services l 14 Project manager and technical advisor Commodity Risk Management Group of the World Bank 3/18/2018

Product packaging Index linked loans l Insurance covers cost of production as financed by Product packaging Index linked loans l Insurance covers cost of production as financed by a Opportunity International Bank of Malawi (OIBM) or MRFC. l OIBM and MRFC pay premiums and recover them through interest rate. l In case of drought, payment made to financial institution –farmer relieved of the burden and is able to borrow for the next season. l 15 3/18/2018

EXAMPLE: LILONGWE CONTRACT, MAIZE 30 days 130 mm 58 MKW/mm 5800 MKW Deficit Rainfall EXAMPLE: LILONGWE CONTRACT, MAIZE 30 days 130 mm 58 MKW/mm 5800 MKW Deficit Rainfall (mm) PHASE 1 Deficit Rainfall (mm) PHASE 2 Sowing & Establishment & Flowering Growth Sowing Window & Dynamic Start Date Phase 3: Trigger Level: Payout per mm: Maximum Payout: 40 days 25 mm 1160 MKW/mm 5800 MKW Payout ($) Phase 2: Trigger Level: Payout per mm: Maximum Payout: Payout ($) 50 days 40 mm 580 MKW/mm 5800 MKW Payout ($) Phase 1: Trigger Level: Payout per mm: Maximum Payout: Deficit Rainfall (mm) PHASE 3 Yield Formation to Harvest Cropping Calendar Final Insurance Payout = min (Max Payout, Phase 1 + 2 + 3 Payouts) 10 th November – 10 January: 25 mm in 10 days

Lesson Learned: Weather Insurance l l l 17 Need to devote significant time and Lesson Learned: Weather Insurance l l l 17 Need to devote significant time and resources for proper communication and explanation with farmers: insurance is new to most Malawians Need greater ownership amongst participating organizations, not over reliance on World Bank champion Need for Malawi Met. Service to understudy CRMG/IRI in contract design activities No major drought so full impact of weather insurance not been tested 20 km radius is too wide, the areas were not homogeneous enough, there is need to review this 3/18/2018

Lesson Learned: Weather Insurance l l 18 Importance of collaborative efforts between producers and Lesson Learned: Weather Insurance l l 18 Importance of collaborative efforts between producers and users weather insurance for farmers in developing countries is feasible Sustainability and scalability will not be achieved unless product development is owned locally and data limitations can be overcome Successful weather risk markets can be created by: – Vigorous product delivery channels to farmers, linkages to finance or supply chain – Local ownership through capacity building and technology transfer 3/18/2018

WAY FORWARD l l 19 Need for reliable, verifiable and accessible meteorological data Upgrade WAY FORWARD l l 19 Need for reliable, verifiable and accessible meteorological data Upgrade primary weather stations to fully automated GSM-enabled stations – Chileka, KIA, Tembwe and Balaka already automated Invest in automatic rain gauges with GSM communication technology Set-up communications Hub in Blantyre to ensure real-time reporting to GTS and transaction to stakeholders 3/18/2018

WAY FORWARD l 20 In conclusion, there is need for Governments to put in WAY FORWARD l 20 In conclusion, there is need for Governments to put in place appropriate policies and allocate sufficient resources (financial and human) for meteorological services to carry out their mandate effectively 3/18/2018

Thank you for your attention 21 3/18/2018 Thank you for your attention 21 3/18/2018