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VisionFund International, World Vision’s microfinance arm and Global Parametrics, has launched a new climate insurance programme, the African and Asian Resilience in Disaster Insurance Scheme (ARDIS), that will benefit more than four million people in six low-income countries
The programme is thought to be the world’s largest non-governmental climate insurance programme. ARDIS will increase access to finance and provide post disaster recovery lending to rural families and smallholder farmers who live below the poverty line and participate in VisionFund’s microfinance network.
The programme is funded by the United Kingdom’s Department for International Development (DFID) and by the InsuResilience Investment Fund, set up by German development bank KfW and managed by Swiss-based impact investment manager BlueOrchard Finance. Financing for the initial preparation and assessment required to implement the programme came from the Rockefeller Foundation and FMO, the Dutch development bank.
In its first year, ARDIS protection will be provided to VisionFund’s clients in Kenya, Malawi, Mali, Zambia, Cambodia and Myanmar, of which around 80 per cent are women. This programme will effectively meet one per cent of the G7 goal to increase access for up to 400mn uninsured people in developing countries to insurance products that protect against climate risk.
The ARDIS programme allows beneficiaries to receive swift access to much-needed credit required by farmers and small businesses after a climate shock. Recovery lending, essentially small loans with special terms, is provided through VisionFund’s microfinance institutions. Such loans are disbursed immediately during and after disasters to help clients maintain or restart economic activities, complementing relief aid which is required for urgent survival needs in disaster situations.
Fast recovery lending to the client is enabled by the provision of liquidity to the microfinance institution in order to bolster its resources to cope with increased demand. Global Parametrics’ advanced climate-based data modelling verifies the climate event and triggers access to both contingent liquidity and risk capital by VisionFund’s microfinance institutions. This injection of funds to the microfinance institutions restores their balance sheets, thus ensuring business continuity or enhancement of operations and services despite the common disruptions created by such calamities. For example, typically in disasters when clients cannot repay loans and there is higher demand for lending, microfinance institutions suffer a reduction in the amount of capital they hold and are therefore required to curtail their lending.
The contingent liquidity for ARDIS is provided by the InsuResilience Investment Fund which is managed by impact investment specialist, BlueOrchard Finance, and backed by KfW on behalf of BMZ, the German Federal Ministry for Economic Cooperation and Development. Risk capital is provided through the Natural Disaster Fund that is managed by Global Parametrics and currently funded by the British government via DfID. The structure offers an affordable and sustainable system for disaster recovery lending at costs of approximately half a per cent of loan portfolio value per annum payable by the microfinance institution.