Promoting crop insurance for small-scale farmers

Long-term Response
El Salvador
Implementing Partner: Lutheran World Federation-Central America
Lead Member: Canadian Lutheran World Relief
People Served: 3,000
Budget: $93,000
Timeline: 2020 - 2021

Canadian Lutheran World Relief is supporting Lutheran World Federation-Central America with a 12-month agriculture and livelihood pilot project in San Miguel and La Paz provinces, totaling $93,000.

El Salvador is one of the world’s most vulnerable countries to the effects of climate change. Increasing variability of rainfall and temperature has led to more than half of households suffering from some degree of chronic food insecurity due to unpredictable weather and poor crop harvests. Small-scale farm families are borrowing money to finance their crop inputs. Climate shocks such as drought and floods can cause farmers to both lose their crops and default on their input loans, causing them to fall further into debt and adopt negative coping strategies.

Weather index insurance is one way to help farmers manage these risks. Unlike traditional crop insurance, which is typically based on the consequence of weather, this kind of insurance has the payout connected to an objective weather variable, such as level of rainfall. Insurance assessments are made using satellite imagery. As LWF’s previous experience and research suggests, this can help farmers receive a timelier payout, which reduces the risk of farmers needing to take on more debt to purchase inputs for the next planting season. In El Salvador, this kind of insurance is already being offered by a public bank.

This project is piloting the education and promotion of weather-index crop insurance for 600 small-scale farming families (approximately 3,000 individuals). The project is also including a declining subsidy for the cost of insurance as an incentive for farmers to try purchasing the insurance. The project will monitor the experience of farmers using this insurance to determine its potential benefits, challenges and feasibility.

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