The European Investment Bank (EIB) and the World Food Programme (WFP) are expanding access to climate-risk insurance for smallholder farmers in Ethiopia through a new initiative designed to protect agricultural livelihoods from extreme weather and natural disasters.
EIB Global is providing a grant of up to €4 million to WFP to develop and roll out tailored microinsurance products covering crop and livestock losses. The initiative is expected to provide climate-risk insurance coverage to around 210,000 smallholder farmers across Ethiopia.
The grant complements a €110 million EIB credit line supporting the third phase of Ethiopia’s Rural Financial Intermediation Programme (RUFIP III). The credit line is channelled through the Development Bank of Ethiopia and provided to eligible rural finance institutions.
The new insurance initiative aims to reduce the financial risks faced by rural lenders and farmers when climate shocks damage crops or livestock. It will support training and capacity building for the Development Bank of Ethiopia, rural financial institutions and smallholder farmers.
A key component is the establishment of a Premium Guarantee Fund, which will help overcome liquidity challenges related to insurance premiums. The fund will provide a guarantee mechanism for rural finance institutions that arrange insurance for farmers if premium payments are delayed or defaulted on.
WFP will use its experience in rural finance and climate resilience programmes in Ethiopia to develop and pilot an index-based microinsurance scheme in partnership with private insurance companies. The insurance products will then be introduced through selected rural finance institutions participating in RUFIP III.
WFP will initially manage the Premium Guarantee Fund before transferring responsibility to the Development Bank of Ethiopia, supporting the long-term sustainability of the programme.
The partnership is designed to address a growing challenge for Ethiopia’s agricultural sector, where climate-related shocks can quickly undermine harvests, household incomes and investments. By combining insurance with access to rural finance and technical support, the initiative aims to give farmers greater confidence to invest in productive activities.
The programme is expected to strengthen the resilience of smallholder farmers while supporting food security and improving access to finance in rural communities. It also aligns with broader development goals by helping micro, small and medium-sized enterprises manage climate-related risks.
The initiative marks the first climate-risk insurance project backed by the EIB and represents a broader effort to integrate climate resilience into rural financial systems.
With 210,000 farmers expected to receive coverage, the partnership between EIB Global and WFP could provide an important model for protecting agricultural livelihoods and expanding climate-resilient finance in Ethiopia.
