EIB Grants €4M to Fund Ethiopia Farmers’ Parametric Insurance
The European Investment Bank has granted up to €4 million to the World Food Programme to launch a parametric insurance scheme covering 210,000 smallholder farmers in Ethiopia, aiming to mitigate climate-related crop and livestock losses.
The European Investment Bank (EIB) has issued a grant of up to €4 million to the United Nations World Food Programme (WFP) to develop and roll out parametric insurance products for Ethiopian smallholder farmers.
Funding and Scope
The grant will support the creation of index-based microinsurance that protects roughly 210,000 farmers against crop and livestock losses linked to adverse weather or natural disasters. The EIB also confirmed that the grant will complement its €110 million credit line for the third phase of the Rural Financial Intermediation Programme (RUFIP III) in Ethiopia. The credit line is channeled through the Development Bank of Ethiopia and on-lent to eligible rural finance institutions.
| Item | Amount |
|---|---|
| EIB grant | €4 million |
| RUFIP III credit line | €110 million |
The grant is financed under the African, Caribbean and Pacific (ACP) Trust Fund’s Member States Compartment.
Implementation Strategy
WFP will use its expertise in rural finance and climate-resilience programming to design and pilot the parametric scheme in partnership with several private insurance companies. The products will be rolled out to selected rural finance institutions under RUFIP III through technical assistance, capacity building and awareness-raising.
Initially, WFP will administer the Premium Guarantee Fund. The fund will help address borrowers’ liquidity constraints and act as a guaranteed mechanism for financial institutions that contract insurance on behalf of final beneficiaries in the event of premium payment defaults. After the pilot phase, management of the fund will be transferred to the Development Bank of Ethiopia.
Impact on Farmers
The initiative is designed to de-risk the agricultural portfolios of rural finance institutions and help final beneficiaries accessing RUFIP III financing manage climate-related shocks. By combining insurance, credit and capacity building, the scheme aims to strengthen resilience, support food security and create more sustainable economic opportunities for rural communities.
EIB Vice-President Gelsomina Vigliotti said, “Climate change remains one of the greatest risks to agricultural livelihoods in Ethiopia. Through this partnership with the World Food Programme, EIB Global is helping rural finance institutions and smallholder farmers better manage climate shocks, protect incomes and improve access to finance.”
WFP Representative and Country Director in Ethiopia, Zlatan Milišić, added, “For millions of smallholder farmers in Ethiopia, climate shocks can quickly wipe out harvests, incomes and hard-earned progress, eroding gains that vulnerable communities have worked hard to achieve. Access to finance is essential for increasing agricultural productivity, but climate risks often discourage both farmers and lenders from making productive investments. This partnership with EIB Global brings together climate risk insurance, rural finance and capacity strengthening to help farmers invest with greater confidence, protect their livelihoods when shocks occur and recover more quickly.”
Future Outlook
The project marks the first climate-risk insurance initiative backed by the EIB. It also aligns with development finance priorities by fostering stable incomes and sustainable growth for smallholder farmers amid climate change. The scheme will aid micro, small and medium-sized enterprises by offering access to microinsurance, thereby de-risking economic activity.
The Premium Guarantee Fund will be transferred to the Development Bank of Ethiopia after the pilot, ensuring the scheme’s long-term sustainability.
