Managing agricultural risk in Mozambique

Project Active from to Firms and Farms

Mozambique is primarily an agricultural economy with 81% of its population engaged in agriculture, which accounts for 32% of its GDP. “There are now 400 extreme weather events every year, four times as many as in 1970” (The Economist, 2017). The direct costs of these extreme events in the form of lost lives, assets, and habitat are evident. For farmers in agricultural-dependent developing countries such as Mozambique, these shocks lead to a loss of financial resources and productive assets with knock-on effects on investments and returns from their farms, trapping them into poverty. The resultant financial uncertainty has deep repercussions on both households' welfare and investments in productive activities. Such adverse shocks also force these individuals to divert resources from other priorities like nutrition, children’s education and healthcare, and lead to persistent damages to their lives and those around them.

The need for risk-mitigation instruments such as agricultural insurance under such situations cannot be overemphasized as they can provide a much-needed safety net to farmers who are vulnerable to climate shocks. However, there are very few insurance products or other risk mitigating instruments currently available to farmers. This lack of risk management instruments may contribute to the fact that only a fraction of Mozambique’s arable land is cultivated.

The primary objective of this report to provide a general overview of the agricultural sector in Mozambique, identify key policy challenges faced by the sector along with potential policy interventions related to agricultural insurance. To achieve this goal, we undertook a review of the current state of the agricultural sector in Mozambique with focus on agricultural insurance. Firstly, we collected data from a myriad of sources, including high-resolution satellite data, to identify the key agricultural risks Mozambique faces and understand its geographic segregation. Secondly, we analysed findings from the general literature on public policies for agricultural insurance in developing countries and linked it with the Mozambican context. Thirdly, an analysis of stakeholders through direct interviews and a focus group discussion provided unique insight on the experience and potential for agricultural insurance in Mozambique.