Adams Chavula Agriculture Meteorologist Malawi Meteorological Services PO Box 1808 BLANTYRE, MALAWI Email:adamschavula@ The role of Malawi

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  • Adams ChavulaAgriculture MeteorologistMalawi Meteorological Services PO Box 1808BLANTYRE, MALAWIEmail:adamschavula@metmalawi.comThe role of Malawi Meteorological Service in Crop Weather Insurance

    Expert Meeting on Requirements of the Catastrophe Insurance and Weather Risk Management Markets for National Meteorological and Hydrological Services5-7 December 2007, WMO Headquarters, Geneva, Switzerland

  • PRESENTATION OUTLINEBackground Information about MalawiThe Malawi Meteorological ServiceOpportunities and ChallengesMalawi Crop Insurance Pilot ProjectLessons LearnedWay Forward

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  • Background Information about Malawi85% 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

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  • The Malawi Met. Service: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**MISSION STATEMENT

  • The Malawi Met. Service**Has 23 full weather stations including Tembwe and Balaka AWSSupported by over 700 rainfall and subsidiary stations operated by various organizations including MoAFSHowever, there is still need to upgrade and expand to all districtsData collection thru phones, email, radios, teleprintersDissemination thru Newspapers, Radio, TV, Website, email, Fax, phone, personal contact, meetings

  • The Malawi Met. Service: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. **

  • Opportunities and ChallengesEnormous volumes of weather and climate data exist in MalawiData collection started many years agoRainfall 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.

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  • Opportunities and ChallengesTraditional insurance products are largely underdeveloped Crop Insurance can be very expensive to administerIndividual Crop yields and field inspections needed Small size of the farmsMalawi Meteorological Service has an operational national maize production forecasting model which can be adapted for reinsurance

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  • **Outputs from Malawi Meteorological Offices national maize production forecasting model Difference2005 indexAverage

  • Opportunities and ChallengesBad news:Thin network of operational weather stationsLack 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)

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  • What is weather insurance?Financial protection based on the performance of a specified index in relation to a specified triggerOffers protection against uncertain costs or revenues that result from volume volatilityFarmers are compensated against unfavorable weather fluctuations that impact physical volumes produced**

  • Malawi Crop Weather Insurance Pilot ProjectWeather based index insurance - recognised as one of the methodologies that can be used sustain livelihoods and reduce poverty as part of the MDGs.

    Malawi is one of the countries piloting the methodology

    Due to high levels of poverty, the farmers were not credit worth and hence they could not access loans to purchase inputs.

    The insurance helps farmers obtain financing necessary to obtain certified seeds, which produce increased yields and revenues as well as greater resistance to disease**

  • PILOT DETAILSFarmers NASFAM smallholder farmers organized in clubsTypically 10-20 members with joint liability for loan repayment Received Groundnut and Maize seed Live within 20 km of a Class A Weather StationFive stations in central Malawi are used for the pilotChitedze Kamuzu International Airport KasunguTembweNkhotakota

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  • Other stakeholdersInsurers:Insurance Association of MalawiFinanciers:Opportunity International Bank of Malawi Malawi Rural Finance Corporation

    Seed provider:NASFAM from supplier Seed Co.

    Supplier of Climate and Weather data Malawi Meteorological Services

    Project manager and technical advisor Commodity Risk Management Group of the World Bank

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  • Product packagingIndex linked loansInsurance covers cost of production as financed by a Opportunity International Bank of Malawi (OIBM) or MRFC.OIBM and MRFC pay premiums and recover them through interest rate.In case of drought, payment made to financial institution farmer relieved of the burden and is able to borrow for the next season.

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  • EXAMPLE: LILONGWE CONTRACT, MAIZEPhase 1: 50 daysTrigger Level: 40mmPayout per mm: 580 MKW/mmMaximum Payout: 5800 MKWPhase 2: 30 daysTrigger Level: 130mmPayout per mm: 58 MKW/mmMaximum Payout: 5800 MKWPhase 3: 40 daysTrigger Level: 25mmPayout per mm: 1160 MKW/mmMaximum Payout: 5800 MKW10th November 10 January:25 mm in 10 days

  • Lesson Learned: Weather InsuranceNeed to devote significant time and resources for proper communication and explanation with farmers: insurance is new to most MalawiansNeed greater ownership amongst participating organizations, not over reliance on World Bank championNeed for Malawi Met. Service to understudy CRMG/IRI in contract design activitiesNo major drought so full impact of weather insurance not been tested20 km radius is too wide, the areas were not homogeneous enough, there is need to review this

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  • Lesson Learned: Weather InsuranceImportance of collaborative efforts between producers and usersweather insurance for farmers in developing countries is feasibleSustainability and scalability will not be achieved unless product development is owned locally and data limitations can be overcomeSuccessful weather risk markets can be created by:Vigorous product delivery channels to farmers, linkages to finance or supply chainLocal ownership through capacity building and technology transfer

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  • WAY FORWARDNeed for reliable, verifiable and accessiblemeteorological dataUpgrade primary weather stations to fully automated GSM-enabled stations Chileka, KIA, Tembwe and Balaka already automatedInvest in automatic rain gauges with GSM communication technologySet-up communications Hub in Blantyre to ensure real-time reporting to GTS and transaction to stakeholders

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  • WAY FORWARD 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**

  • Thank you for your attention

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