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| Title | Weather Risk Management for Agriculture and Agri-Business in Developing Countries |
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| Author | Hess, U.; Richter, K.; Stoppa, A. |
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| Content Language | English (en) |
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| Document Type | Book Chapter |
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| Date Of Publication | 2002 |
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| Description | This chapter has three components. The first part argues that weather risk causes substantial inefficiencies in developing countries; agri-businesses, faced with underdeveloped formal financial markets, have to rely on traditional weather risk management (WRM) that is associated with under-investment and over-diversification. The authors discuss how new WRM can overcome the pitfalls of traditional WRM and have a large development impact. They argue that successful weather risk-sharing arrangements in developing countries would offer potentially huge benefits not just to farmers, but also to agri-business and financial markets. With the advent of effective WRM, finance institutions would be able to collateralise rural credit more efficiently and extend loans to groups of weather-exposed farmers that otherwise would not be bankable. In the second section, the authors look at the key success factors of new WRM in emerging markets. Five factors are highlighted: - Good weather data in key locations
- The financial intermediaries and their clients
- Facilitation by development organisations
- A benign regulatory framework
- Risk transfer mechanisms into international weather markets
The final part turns to the operational aspects of a new WRM, studying in detail the case of rainfall index insurance for cereals in Morocco. Ultimately, the authors conclude, the emergence of a vibrant weather market will be driven by knowledge transfers to local “champions” who grasp the opportunity, as well as the demonstration effects of a few emerging market transactions and the willingness of global weather risk market makers to shoulder some up-front costs in order to reap the benefits of a globally diversified weather market. |
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| Publisher | Risk Books |
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| Number of Pages | 16 pp. |
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| Edition | Climate Risk and the Weather Market |
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| Series ID | 200207 |
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| Keywords | INSURANCE, RISK MANAGEMENT |
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weather risk management (chapter) (EN)
