The European Investment Bank (EIB), through its development arm EIB Global, is providing a grant of up to €4 million to the World Food Programme (WFP) to support the development and rollout of tailored climate-risk insurance products for smallholder farmers in Ethiopia, according to a press release. It is the first climate-risk insurance project backed by the EIB. The announcement was made at the ongoing United Nations Convention to Combat Desertification (UNCCD) COP 17 in Mongolia. The grant complements EIB Global’s €110 million credit line for the third phase of the Rural Financial Intermediation Programme (RUFIP III) in Ethiopia. Around 210,000 smallholder farmers are expected to be covered by adapted microinsurance products protecting them against loss of crops or livestock due to adverse weather conditions or natural disasters.
The credit line is channeled through the Development Bank of Ethiopia and on-lent to eligible rural finance institutions. The grant is financed under the African, Caribbean and Pacific (ACP) Trust Fund’s Member States Compartment. The initiative is designed to de-risk the agricultural portfolios of rural finance institutions under RUFIP III. It also aims to help final beneficiaries accessing RUFIP III financing manage climate-related shocks. The scheme brings together climate risk insurance, rural finance and capacity strengthening for Ethiopian farmers.
Activities supported by the grant will include capacity building for the Development Bank of Ethiopia, rural finance institutions and smallholder farmers. The grant will also fund the establishment of a Premium Guarantee Fund to pre-finance insurance premiums. The Premium Guarantee Fund will help address borrowers’ liquidity constraints. It will serve as a guaranteed mechanism for rural finance institutions that contract insurance on behalf of final beneficiaries in the event of premium payment defaults. WFP will initially administer the Premium Guarantee Fund before transferring its management to the Development Bank of Ethiopia.
WFP will draw on its experience in rural finance and climate-resilience programming in Ethiopia to develop and pilot the index-based microinsurance scheme in partnership with private insurance companies. The products will be rolled out to selected rural finance institutions under RUFIP III through technical assistance, capacity building and awareness raising.
“Climate change remains one of the greatest risks to agricultural livelihoods in Ethiopia. Through this partnership with the World Food Programme, EIB Global is helping rural finance institutions and smallholder farmers better manage climate shocks, protect incomes and improve access to finance,” said EIB Vice President Gelsomina Vigliotti.
She added that combining insurance, credit and capacity building will strengthen resilience, support food security and create more sustainable economic opportunities for rural communities. WFP Representative and Country Director in Ethiopia, Zlatan Milišić, described the initiative as an important step toward building more inclusive and climate-resilient financial systems in Ethiopia.
As a direct result of this operation, 210,000 smallholder farmers in Ethiopia are expected to be covered by adapted microinsurance products. The grant is aligned with development-finance priorities by promoting stable incomes and sustainable growth for smallholder farmers in the face of climate change. It also supports micro, small and medium-sized enterprises by providing access to microinsurance to help de-risk economic activity. The partnership pairs EIB Global’s financing capacity with WFP’s field experience in Ethiopia. Together, they aim to protect livelihoods and improve access to finance for vulnerable rural communities.