VisionFund: Launch of the largest Non-Governmental Climate Insurance Programme for African & Asian Smallholder Farmers

More than four million people in six countries are expected to benefit from the newly launched African and Asian Resilience in Disaster Insurance Scheme (ARDIS). ARDIS will increase access to finance and provide post disaster recovery lending to rural families and smallholder farmers who live on or below the poverty line and participate in VisionFund’s microfinance network. According to VisionFund, the program is the world’s largest non-governmental climate insurance program – more than 690,000 families from rural regions will benefit from ARDIS. To launch ARDIS, six VisionFund microfinance institutions participate and in the following years the programme will be extended to more countries.

What does ARDIS do?

The ARDIS programme allows the VisonFund microfinance institutions in Cambodia, Kenya, Malawi, Mali, Myanmar and Zambia to provide much-needed recovery lending to farmers and small businesses after an extreme weather event. Such loans are disbursed immediately during and after disasters to help clients to cushion the worst effects of weather catastrophes, maintain or restart economic activities and complement relief aid required for survival needs in disaster situations.

Who is involved?

ARDIS was launched jointly by VisionFund International, Global Parametrics and the InsuResilience Investment Fund (IIF). VisionFund International is a microfinance group that provides financial services primarily in rural areas in 36 developing countries. Global Parametrics is a social venture funded by the IIF and the United Kingdom’s Department for International Development (DFID); the firm engineered ARDIS financial parametric structure. The IIF was set up by German development bank KfW on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) and finances companies that offer climate risk insurance for poor and vulnerable people in developing countries. The extreme weather risk pool Natural Disaster Fund (NDF), managed by Global Parametrics and funded by DFID, provides the insurance-like component of ARDIS. Together these institutions developed the unique three-stage risk-layering approach of ARDIS.

How does the three-stage approach work?

ARDIS was structured as a holistic, three-tiered Financial Disaster Risk Management (FDRM). As soon as the defined insured event is determined on the basis of weather data from external providers (e.g. satellites), the following three stages interlock or follow one after the other:

  1. The affected VisionFund microfinance institution receives financing for recovery lending from an internal liquidity pool of the VisionFund Group
  2. Additional liquidity is automatically provided via an IIF credit line when certain weather events occur under the parametric model.
  3. On even more extreme weather events the NDF pays on a parametric insurance derivative to VisionFund, which enables VisionFund to further strengthen its affiliate’s equity capital.

What’s so special?

The three-stage approach enables VisionFund to provide its microfinance clients with rapid and efficient assistance in the event of a disaster. The innovative FDRM approach, as a combination of financing and insurance components – allows for cost-efficient protection of their clients in developing countries.

ARDIS current reach will effectively meet one per cent of the G7 goal to increase access for up to 400 million uninsured people in developing countries to insurance products that protect against climate risk.