Download Local maize yield simulation for Malawi

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]
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
 The Malawi Meteorological Service
 Opportunities and Challenges
 Malawi Crop Insurance Pilot Project
 Lessons Learned
 Way Forward
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Background Information about Malawi
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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
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The Malawi Met. Service:
MISSION STATEMENT
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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 socioeconomic development
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Motto: Be wise, be weather-wise
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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 MoAFS
•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
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The Malawi Met. Service:
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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.
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Opportunities and Challenges
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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.
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Opportunities and Challenges
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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
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Difference
Outputs from Malawi Meteorological Office’s
national maize production forecasting model
Average
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2005 index
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Opportunities and Challenges
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Bad news:
– Thin network of operational weather stations
– Lack of weather data in Crop growing areas
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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?
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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
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Malawi Crop Weather Insurance Pilot Project
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Weather based index insurance - recognised as one of the
methodologies that can be used sustain livelihoods and
reduce poverty as part of the MDGs.
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Malawi is one of the countries piloting the methodology
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Due to high levels of poverty, the farmers were not credit
worth and hence they could not access loans to purchase
inputs.
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The insurance helps farmers obtain financing necessary to
obtain certified seeds, which produce increased yields and
revenues as well as greater resistance to disease
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PILOT DETAILS
Farmers
􀂉 NASFAM smallholder farmers organized in clubs
Typically 10-20 members with joint liability for loan repayment
􀂉 Received Groundnut and Maize seed
􀂉 Live within 20 km of a Class A Weather Station
 Five stations in central Malawi are used for the pilot
 Chitedze
 Kamuzu International Airport
 Kasungu
 Tembwe
 Nkhotakota
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Other stakeholders
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Seed provider:
NASFAM from supplier Seed Co.
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Supplier of Climate and Weather data
Malawi Meteorological Services
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Insurers:
Insurance Association of Malawi
Financiers:
Opportunity International Bank of Malawi
Malawi Rural Finance Corporation
Project manager and technical advisor
Commodity Risk Management Group of the World Bank
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Product packaging
Index linked loans
 Insurance 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, MAIZE
30 days
130mm
58 MKW/mm
5800 MKW
Deficit Rainfall (mm) 
PHASE 1
Deficit Rainfall (mm) 
PHASE 2
Sowing & Establishment
Growth & Flowering
Sowing Window &
Dynamic Start Date
Phase 3:
Trigger Level:
Payout per mm:
Maximum Payout:
40 days
25mm
1160 MKW/mm
5800 MKW
Payout ($) 
Phase 2:
Trigger Level:
Payout per mm:
Maximum Payout:
Payout ($) 
50 days
40mm
580 MKW/mm
5800 MKW
Payout ($) 
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)
10th November – 10 January:
25 mm in 10 days
Lesson Learned: Weather Insurance
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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 8enough,
there is need to review this
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Lesson Learned: Weather Insurance
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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
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WAY FORWARD
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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
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WAY FORWARD
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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
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Thank you
for your attention
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