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Using the right risk management tools for agri-SMEs to address COVID-19 and future resilience

Emerging Insight #:

  184
 

Date of Release:

  August 17, 2021
 

Subtopics:

  Agriculture
 
 

A series of webinars shed light on interesting trends and developments in the agri-food system

The COVID-19 pandemic has shown the weaknesses in our agri-food system. Many agricultural small and medium-sized enterprises (agri-SMEs) are suffering from disruptions in supply chains and from cash flow issues. Because of their limited capital to make investments to strengthen their resilience, these agri-SMEs may not be that attractive for financial service providers (FSPs). The FSPs would have an increased risk in their agriculture loan portfolios.

Throughout 2020, the ILO’s Impact Insurance Facility joined a series of e-learning “Live Talks”, jointly organized with the Smallholder and agri-SME Finance and Investment Network (SAFIN) and the Platform for Agricultural Risk Management and co-hosted by SAFIN and the Forum for Agricultural Risk Management in Development. The goal of this series was to have a closer look at the existing range of agricultural risk management tools that can be used by agri-SMEs to address the current crisis and to build resilience for the future.

One of the key takeaways of the Live Talks was that insurance schemes can increase the willingness of agri-SMEs to make riskier and potentially more profitable investments. This in turn would help them scale up their businesses in the future. These insurance schemes can help agri-SMEs to manage the impact of unexpected economic shocks like COVID-19 (with health insurance) or climate and natural disasters (with agriculture insurance), or even a combination of both.

The pandemic has also led to changes in the agricultural sector at the policy-making level. Many governments have taken steps to deal with the risks and needs along different value chains throughout the COVID-19 crisis. In response to the pandemic, policy-makers have also started to expand social protection programs, including cash transfers and tax moratoriums. Our new project with the Agence Française de Développement looks at how partnerships between governments and the insurance sector can be structured to achieve policy objectives.

The report featuring the Live Talks shares ten key takeaways from the series. Click here for the full report to read all of them.