The initiative, announced at the UNCCD COP17 in Mongolia, targets the intersection of agricultural credit and climate vulnerability. By complementing the existing €110 million RUFIP III credit facility, the program addresses the reluctance of lenders to finance agriculture in regions prone to drought. The grant facilitates a Premium Guarantee Fund, which pre-finances insurance premiums and protects rural financial institutions against defaults caused by weather-related losses.
The World Food Programme will spearhead the development of index-based microinsurance schemes, working alongside private insurers and the Development Bank of Ethiopia. This model is designed to move beyond reactive emergency aid, instead providing a sustainable financial framework that encourages farmers to invest in seeds and equipment without the looming threat of total financial collapse after a bad season. By stabilizing the income of smallholders, the project seeks to bolster food security and maintain the flow of credit to rural enterprises that underpin the local economy.
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