Under the project, the payment of insurance compensation will provide timely and adequate financial protection to mitigate losses incurred as a result of climate-related disasters.
The Board of Directors of the African Development Bank Group has approved a grant package of nearly $34.8 million ($34,796,402.40) to strengthen the resilience and adaptation to climate disaster risks of vulnerable communities in Malawi and Zimbabwe.
Under the African Disaster Risk Financing Program (ADRiFi), led by the Bank Group, the project titled “Mitigation of Fragility through the Southern Africa Disaster Risk Financing Program” will boost institutional capacities to prepare and manage climate risks and strengthen financial protection against disaster risks through the sovereign transfer of these risks.
According to a statement reaching APA, the project will also encourage the adoption of index-based crop insurance to mitigate drought and other production risks at the microeconomic level.
Malawi and Zimbabwe face significant climate risks, but they lack adequate climate risk management and adaptation mechanisms. They are particularly vulnerable to climatic shocks such as drought, floods and tropical cyclones, which contributes to their fragility. Strengthening disaster risk management, improving early warning systems and strengthening institutional arrangements are essential for the preparedness and resilience of these two countries.
Under the project, the payment of insurance compensation will provide timely and adequate financial protection to mitigate losses incurred as a result of climate-related disasters, thereby protecting households from poverty and businesses from bankruptcy. Climate risk insurance is expected to lead to behavioral changes among beneficiaries, such as increasing investments in climate-resilient livelihoods or saving for future insurance premiums.
This project will build on the successes of the ADRiFi program and the valuable contributions of the Bank’s partners, which have significantly improved the financial resilience of Malawi and Zimbabwe. During the 2024-2025 drought caused by the El Niño phenomenon, the African Risk Capacity (ARC), the Bank’s partner in the ADRiFi program, notably released more than $45 million to support farmers affected by the drought . This funding enabled critical food assistance and recovery interventions, helping communities rebuild and grow in the face of adversity.
The project is aligned with the Bank’s “High 5” priorities, in particular “Feed Africa” and “Improve the quality of life of people in Africa”. It is also aligned with the Bank’s Ten Year Strategy for the period 2024-2033, and it will contribute to the Bank’s Country Strategy Paper for Malawi, which focuses on supporting economic diversification through investments in agricultural infrastructure and value chains.
TE/APA
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