The project received funding to address the challenge presented by uninsured risks, which is a major cause of low agricultural productivity in the Horn of Africa. It proposed a market-based innovative risk management solution in the form of Risk-Contingent Credit (RCC), a social safety net that could mitigate drought risks for the rural poor and improve farm productivity and livelihood. RCC is a linked financial product that embeds within its structure insurance protection which, when triggered, offsets loan payments due to the lender. RCC seeks to address the challenge that lenders are reluctant to lend to farmers because of the financial risks associated with crop failure or radical decreases in market prices. Because RCC targets downside business risk, it simultaneously reduces financial risk and exposure. This risk balancing effect encouraged increased supply of and access to credit but also encouraged risk-rationed farmers to increase the use of credit. Satellite imagery was used to provide a baseline for the insurance offering. Click here to download the solution statement.
