De-risking smallholder agricultural value chains: promising scalable risk management solutions

SUMMARY

Smallholders face a variety of risks that make their productivity and incomes unstable and unpredictable. These risks – often related to climate change – disincentivize them from investing in high-value inputs to improve their returns.

Various forms of agricultural insurance, including sovereign-level products and index-based micro-level insurance, have emerged in recent years and have the potential to protect smallholders from shocks and to unlock greater investment in new agricultural technologies and inputs.

A successful scaling up of agricultural insurance in developing countries will depend on improving local technical capacity and policy environments. However, these efforts must be part of a wider menu of risk management and resilience-building measures aimed at smallholders.

This is the fifth chapter of the book Inclusive Growth: Making Value Chains Work for Smallholder Farmers, published by the Islamic Development Bank Group. The publication explores how to improve the efficacy of global value chains in drawing smallholders inclusively into a productive agriculture and rural development sector. It also provides insights into practical solutions for increasing the engagement of smallholders in profitable global value chains.