R4 Summary Annual Report 2021
Now in its ninth year of operation, R4 is still the World Food Programme's flagship program to demonstrate effective integrated climate risk management.
The R4 Rural Resilience Initiative
Background
Resource-poor and food-insecure households are faced with a wide range of shocks, including climate variability, extreme weather events, conflict, and socioeconomic crises. While vulnerable communities are more likely to suffer heavy losses from these shocks, they often lack access to efficient and effective formal risk management and social protection mechanisms. The World Food Programme's (WFP's) vision is to end global hunger by helping reduce risk and vulnerability to shocks and achieving sustainable food security and nutrition. WFP recognizes that to achieve its objective, it must rely on a comprehensive set of integrated risk management strategies and tools that address both the climatic and non-climatic factors contributing to people’s vulnerability.
The R4 Model
The R4 Rural Resilience Initiative (R4) began as a strategic partnership between the WFP and Oxfam America in 2011 to build on the success of Oxfam America’s groundbreaking pilot project, Horn of Africa Risk Transfer for Adaptation (HARITA), in rural risk management. After the successful expansion of the R4 integrated approach under the global partnership, in October 2018, Oxfam America transitioned into an advisory role with WFP taking the lead on the management and scale-up of R4 operations globally. WFP gratefully acknowledges the pioneering role Oxfam America played together with the communities, the Relief Society of Tigray and other local and international actors in creating, developing and transferring the HARITA model outside Ethiopia. R4 currently reaches nearly 180,000 vulnerable households (55 percent women) and their families in Bangladesh, Burkina Faso, Ethiopia, Kenya, Madagascar, Malawi, Mozambique, Senegal, Zambia and Zimbabwe with an integrated risk management strategy that combines four components: improved natural resource management through asset creation or improved agricultural practices (risk reduction); microinsurance (risk transfer); increased investment, livelihoods diversification, and microcredit (prudent risk taking); and savings (risk retention). Of these farmers, nearly 3,500 accessed insurance products developed through R4, either through subsidies from other donor-funded programs or by paying their insurance premium fully in cash.
R1. Risk Transfer
R4 enables the poorest farmers to access agricultural insurance. The initiative has been one of the most successful efforts to develop and scale up index-based insurance products among the most vulnerable and food-insecure communities. Index-based insurance — an innovative type of insurance based on a proxy for losses — compensates farmers based on changes in a predetermined index. Insurance payouts are distributed to insured farmers if the index falls beyond the predetermined threshold. Rapid compensation for losses means that farmers can avoid selling productive assets and recover faster from climate-related shocks. Predictable income can reduce negative coping strategies and encourage rural households to invest in activities and technologies with higher rates of return. Insurance can also serve as collateral to obtain credit at better rates and provide enough confidence to farmers to invest more.
R4 supports the development of a wide range of innovative products that help farmers access insurance policies that best fit their needs across regions and countries, including:
- Weather index insurance (WII): This product uses a weather index, such as rainfall, measured either by weather stations or satellites, to determine payouts rather than actual yields, thus eliminating the need for in-field assessment. It can cover farmers against drought, dry spells or excess rainfall.
- Area yield index insurance (AYII): This product can offer coverage against a host of risks affecting an entire area, including pests and diseases, and uses crop sampling at the end of season to determine value loss. Due to the inherent design of AYII, expected payout timeframe is longer compared to WII, but shorter than traditional agriculture insurance
- Hybrid index insurance (HII): This product is a combination of WII and AYII. It helps protect farmers against low yields due to several risks, including pests, diseases and unpredictable weather.
- Index-based livestock insurance (IBLI): This product uses vegetation indexes such as the Normalized Difference Vegetation Index to measure pasture availability. If the vegetation measured is below average historical growth thresholds, the product automatically triggers payouts that can be used to provide supplementary feeding, inputs, as well as timely veterinary care, which can be critical in keeping livestock alive during the season
R2. Risk Reduction
Households that are cash constrained have the option to pay insurance premiums by engaging in asset creation activities or by adopting improved agricultural practices. Assets built or rehabilitated through these activities (such as water and soil conservation infrastructure), promote resilience by steadily decreasing vulnerability to climate risks. They also promote higher productivity by building the natural asset base available to farmers. Farmers can also access insurance by adopting conservation agriculture practices, by growing drought-resistant crops or by participating in trainings on financial inclusion, financial education and post-harvest loss management. The risk-reduction component is usually built into government safety net and other programs, as well as WFP Food Assistance for Assets initiatives.
R3. Risk Retention
Through individual or group savings, farmers can build a financial base that serves multiple purposes. For instance, savings provide a buffer for short-term needs, retaining risks within households and communities and increasing the farmers' ability to cope with shocks. Group savings can be loaned to individual members with particular needs, providing a self-insurance mechanism for the community. Setting up several savings funds for different purposes, including for agricultural investment, insurance premium payment, and for risk management can support participants’ graduation and build their resilience to climate and other shocks. Finally, savings can also be accumulated in-kind, for example through cereal banks which allow farmers to stock surplus yields or livestock.
R4. Prudent Risk Taking
Smallholder farmers are often reluctant to invest in productive inputs or hired labor as their farms are vulnerable to external shocks. Farmers may, thus, prefer low input-low output production systems that guarantee a predictable, although low, income. Microfinance institutions may limit investments because of the perceived high risk of default in bad seasons. With increased food security and a stronger asset base, R4 farmers can increase their savings and stocks, using them along with insurance as collateral to obtain credit for investing in productive assets such as seeds, fertilizers and new technologies that increase productivity. Moreover, insured farmers are more confident to take out loans or invest in productive inputs, including hired labor and livelihood diversification, knowing that the financial risks of climate-related shocks are minimized.
2021 R4 Annual Report
2020 was a year of compound and cascading shocks. The COVID-19 pandemic was an unprecedented test of governments’ abilities to manage risks, which are continuing to be challenged by compounding climate-related disasters and economic crises. Today, more than ever, the need seems evident for risk financing solutions and integrated and layered approaches that provide an early response after a shock while reinforcing the ability of food-insecure communities to cope with future shocks. However, humanitarian assistance and government response budgets cannot provide enough assistance to meet the increasing demand.
Despite the challenges posed by the COVID-19 pandemic, WFP has continued to support vulnerable and resource-poor communities to better manage climate risks and build their resilience against climate and other shocks. In 2020, R4 reached nearly 180,000 farming households (55 percent women), benefitting approximately 900,000 people in Bangladesh, Burkina Faso, Ethiopia, Kenya, Madagascar, Malawi, Mozambique, Senegal, Zambia and Zimbabwe. Of these farmers, nearly 3,500 accessed insurance developed through the R4 initiative either through subsidies from other donor-funded programs or by paying the premium cost fully with their own cash.
COVID-19-related restrictive measures called for quick programmatic adjustments in the different R4 countries. These adjustments included the development of new processes for the distribution of insurance products, adapting the conditionality to access insurance, promoting digital solutions to ensure farmers continued to receive information and access services, shifting to remote monitoring tools and ensuring appropriate COVID-19 preventive measures when disbursing payouts and during in-person trainings. Despite the challenging situation, R4 saw a nearly 90 percent growth in the number of farmers insured in 2020.
The initiative has expanded to three new countries: Bangladesh, Madagascar and Mozambique. In Bangladesh, WFP introduced its first Index-based flood insurance product for protecting households from catastrophic flooding, which triggered approximately $30 in payouts per participant in its first year. In Madagascar, R4 introduced an area yield index insurance product to 3,500 farmers (72 percent women), while in Mozambique, R4 insured 2,400 farmers (79 percent women) against drought and dry spells for the 2020/21 agricultural season.
In Ethiopia, R4 significantly scaled up from 28,000 to 67,000 farmers (42 percent women). This year, activities focused on building the index design capacity of local stakeholders and defining the handover strategies with the local insurance companies in charge of taking over distribution and management of microinsurance products. Under the Satellite Index Insurance for Pastoralists in Ethiopia, 15,500 pastoralists accessed index-based livestock insurance. Following the roll out of the Adaptation Fund project, R4 scaled-up in Malawi, where the initiative insured nearly 67,000 households (62 percent women), a 71 percent growth compared to last year. The number of farming households more than doubled in Zimbabwe, reaching nearly 6,000 farmers insured (62 percent women) and in Burkina Faso, where the initiative insured 2,500 farmers (56 percent women). In Senegal, WFP started implementing its first Green Climate Fund project, which will scale-up access to microinsurance for 45,000 vulnerable farming households. In Zambia, WFP continued to provide assistance to the Government to strengthen its capacity on Weather Index Insurance (WII) product development and monitoring and insured over 7,800 farmers (48 percent women).
In 2020, WFP also laid the groundwork for expansion into Latin American and the Caribbean region, with the regional office establishing a risk-financing strategy to encourage the adoption of innovative, responsible, sustainable and scalable risk- financing tools. A number of countries in the region are currently exploring pathways to integrate risk-financing tools within their programs, with some countries starting implementation in 2021. R4 also continued building the technical and programmatic capacity of local stakeholders and governments to ensure national ownership of insurance products and systems. In addition, the initiative supported the development of innovative insurance products such as hybrid indices and promoted the integration and layering with other WFP climate risk-financing programs. R4 also made investments in strengthening and standardizing monitoring, evaluation and learning across the entire portfolio as well as defining a comprehensive research agenda. Finally, WFP strengthened its engagement with global insurance-related platforms and fostered partnerships with other international agencies and institutions to promote the scaling-up of insurance solutions for the most resource-poor and food-insecure households and communities.
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