Being a smallholder farmer has always been an exceptionally daunting proposition. In addition to the long hours and hard – and often dangerous – physical labour involved, they must surmount multiple challenges and risks to harvest a profitable crop.
Financing for seeds, fertilisers and equipment is frequently scarce. The market prices their crops fetch at harvest can be volatile and unpredictable. Then there are the vagaries of the weather, always the scourge of farmers throughout history. And today, climate change is generating more and more of the kinds of unusual and extreme weather events that threaten widespread havoc among smallholder farmers. Too much or too little rain, prolonged heat or cold, hail storms, high winds; any of these can affect a harvest that falls short of expectations or fails entirely.
The challenges and risks noted above are even more pronounced for smallholder farmers in Nicaragua, a politically, economically and environmentally fragile country.
This article looks at the development of a novel parametric insurance programme for smallholder farmers in Nicaragua which helps protect over 6,000 coffee and grain farmers, and how the programme minimises basis risk in the country.