Malian agricultural producers and microfinance lenders are exposed to the risk of extreme, correlated drought. For microfinance institutions that serve agriculture, a capital rationing problem has emerged because donors are reluctant to increase their capital exposure to this non-diversifiable risk. Small farmers remain vulnerable to the correlated event and are restricted in the amount of working and investment capital they are able to obtain. This prefeasibility analysis examines the basic conditions necessary to support the market development of index-based insurance products for Malian farmers and lenders to transfer this weather risk.

 

This paper was written by GlobalAgRisk, under a project led by Save the Children and funded by USAID and others.