Michael Carter – Director of Feed the Future Innovation Lab for Markets, Risk & Resilience – shares examples from Mali, Bangladesh, Mozambique and Tanzania where risk management tools are helping rural families not only withstand shocks, but move towards greater prosperity. 

This is the ninth story in the Windows on Resilience series produced by CDKN and the Resilience Knowledge Coalition for the COP26 Resilience Hub – a physical and virtual space at COP26 dedicated to sharing best practice and building collaboration, momentum and new opportunities on adaptation and resilience. This story series shares practical and inspiring resilience solutions from communities and countries around the globe. Register for the Resilience Hub here. 

Resilience itself can liberate families to focus on building stronger livelihoods for themselves and their children.

Small-scale agriculture is the foundation of global food security. For most rural families in developing countries, small-scale agriculture, either by growing crops or raising livestock, provides the only source of food and income.

Rural families also face tremendous risks, many of them related to the weather. In Eastern Africa, the risk of drought has always threatened people’s crops and livestock. In South Asia, severe storms cause flooding that destroys rural livelihoods. In recent years, climate change has made these events more extreme.

Over the past decade, our research has come to focus on developing and testing ways to promote resilience to just these kinds of shocks. This research has generated valuable insights on what tools and development programming spark resilience. Most recently we find evidence that there is even a way to move beyond resilience, providing a ladder up to prosperity. Many of these innovative ideas and approaches are ready to scale. 

The impacts of weather-related shocks

The focus on resilience in development programming is especially urgent, as the way that families cope with the shock of a disaster has lasting consequences. In a bad year, they may have to choose who eats and who goes without food entirely. They often can’t afford to keep their children in school. When these circumstances compromise their children’s development, a single shock can also leave its mark across generations.

These risks also come with deep financial costs that keep people poor even absent a shock. Rather than investing in improved seeds or other inputs that can increase productivity and income, families may save their scarce resources in the form of food or cash. While these strategies may help a family to survive a catastrophe, they undercut what’s possible in good years.

A new generation of resilience programming in developing countries

USAID defines resilience as the ability to withstand shocks and stressors without lasting consequences. However, a growing body of research shows that resilience in itself may only be part of a greater opportunity when the risk of weather-related disasters is what holds people back.

Research from the field of development economics is finding evidence that when people know they can withstand a shock, they invest more in agricultural and other economic activities. Resilience itself can liberate families to focus on building stronger livelihoods for themselves and their children. We call this phenomenon Resilience+.

Proven and scalable approaches to generating Resilience+

A growing body of research shows that making tools to manage risk accessible to rural families can be transformative. Much of this research has developed and tested forms of agricultural index insurance, which bases payouts on an easy-to-measure index of factors, such as rainfall or average yields, that predict individual losses rather than verified losses like conventional insurance. This low-cost form of insurance can be scaled in remote, rural areas where conventional insurance has never been possible. 

In Mali, a research team partnered with a local cotton company, a private insurance broker and others, to offer insurance on credit with seeds and other regular inputs to small-scale cotton farmer groups. We learned that the farmer groups that purchased the insurance increased their cotton planting by between 25-40%. The resulting increase in cotton planted would at harvest increase average income by about US$250 on top of the average annual agricultural income of about US$1,400. We estimated that every US$1 a farmer spent on insurance had a return of US$6.25. 

In Bangladesh, a research team partnered with BRAC to test pre-approval for an emergency loan designed to convey all the benefits of insurance, but without the up-front cost. Families who were told they would have access to the emergency loan planted about 25% more rice than households who were not offered the loan. Families who did not suffer any flood losses produced about 33% more from their crops.

Most recently, I led a project in Mozambique and Tanzania that bundled International Maize and Wheat Improvement Center (CIMMYT) stress-tolerant maize seeds with index insurance for a seed-replacement guarantee. Farmers who purchased the insured seeds had 12% higher yields in normal years. In the year after severe drought and seed replacements, these farmers nearly doubled their investments in improved seeds and realised yields that were double those of their neighbours who lacked access to the insured seeds.

Adopting approaches that generate Resilience+

The underlying idea of each of these three projects is scalable right now, and only requires two components. First, families need to be able to afford and access productive investments, like improved seeds or chemical fertilizers, that can increase their agricultural yields. The second component is a low-cost and reliable tool rural families can use to manage their climate-related risk. 

Agricultural index insurance is potentially one of these risk-management tools. While this form of insurance has become increasingly available across Sub-Saharan Africa and South Asia in the past decade, many of the products available have been of such low quality that they are more likely to leave families worse off for having purchased it. 

We are seeking to address the challenge of quality through Quality Index Insurance Certification (QUIIC), which we established in partnership with Nairobi-based Regional Center for Mapping of Resources for Development (RCMRD) and with funding from USAID. For individual farmers, QUIIC certification makes clear the difference between a product that offers real value from one that doesn’t. 

Uptake for agricultural index insurance has also been slow because it is an unfamiliar financial tool that provides no benefits until there is a shock. However, recent research has shown that subsidies to reduce the cost of insurance when there are no shocks, paired with financial literacy training, together establish a foundation for deeper understanding of how the technology works. This deeper understanding can lead to long-term adoption and the benefits of resilience to shocks.

As the additional shock of the Covid-19 pandemic has added to the numbers of vulnerable rural families, there is more urgency than ever to accelerate efforts to generate Resilience+. The virtuous circle of investment and gains can quickly become self-reinforcing. That is the potential of Resilience+ and the reason we are developing and improving innovations that reduce poverty and spur agricultural growth.

Join us at COP26

Feed the Future Innovation Lab will be hosting a conversation at the Resilience Hub with the Resilience Knowledge Coalition (Global Resilience Partnership), Glasgow Caledonian University (GCU), Atlantic Council and Resilience Shift on ‘How do we build inclusive resilience – a global conversation’ on 8 November from 8.30-9.30 GMT. Weaving in emerging themes from week one of COP26 and the Resilience Hub, and looking forward to week two, this session will tackle tangle with issues of climate justice, global South under-representation, and the lack of investment in policies and programmes that truly address the climate risks we face, and that prevent us from not just surviving but thriving into the future. Join in person or follow online.

Michael Carter is a Distinguished Professor of Agricultural and Resource Economics at the University of California, Davis, where he directs the Feed the Future Innovation Lab for Markets, Risk & Resilience. His research in rural development spans a number of areas, including poverty dynamics and productive social safety nets, the impact of violence on aspirations and hope, and a suite of projects that design, pilot and evaluate agricultural index insurance as a tool to alleviate chronic poverty.

Photo: MRR Innovation Lab, Samburu, Kenya. Courtesy of Pablo Delvaux.