EIB Backs Ethiopia Climate Insurance Scheme for 210,000 Smallholder Farmers

By Mintesinot Nigussie  |  August 28, 2026

The European Investment Bank will provide up to 4 million euros to support a climate-risk insurance scheme expected to cover 210,000 smallholder farmers in Ethiopia, linking insurance protection to a wider 110 million euro rural finance programme.

The grant, announced at the UN Convention to Combat Desertification COP17 in Mongolia, will support the development and rollout of index-based microinsurance products designed to protect farmers against crop and livestock losses caused by adverse weather and natural disasters.

It is the first climate-risk insurance project backed by the European Investment Bank.

The funding will complement EIB Global’s 110 million euro credit line for the third phase of Ethiopia’s Rural Financial Intermediation Programme, known as RUFIP III. The facility is channelled through the Development Bank of Ethiopia and then on-lent to eligible rural financial institutions.

The new insurance scheme is intended to address a central problem in agricultural finance: climate risks that can discourage both lenders and farmers from making productive investments.

The World Food Programme will develop and pilot the insurance products with private insurers before rolling them out through selected rural financial institutions participating in RUFIP III. The programme will also provide capacity building for the Development Bank of Ethiopia, financial institutions and farmers.

Part of the grant will support the creation of a Premium Guarantee Fund to pre-finance insurance premiums. The mechanism is intended to address liquidity constraints among borrowers and protect rural financial institutions when premiums are not paid.

The World Food Programme will initially administer the fund before transferring its management to the Development Bank of Ethiopia.

"Climate change remains one of the greatest risks to agricultural livelihoods in Ethiopia," said Gelsomina Vigliotti, vice-president of the European Investment Bank. "By combining insurance, credit and capacity building, this initiative will strengthen resilience, support food security and create more sustainable economic opportunities for rural communities."

The initiative seeks to integrate climate insurance into Ethiopia’s rural financial system rather than operate it as a standalone humanitarian programme, with the aim of allowing farmers to access credit while reducing lenders' exposure to climate-related losses.

Zlatan Milišić, the World Food Programme’s representative and country director in Ethiopia, said climate shocks could wipe out harvests and incomes and discourage investment by both farmers and lenders.

The grant is financed through the African, Caribbean and Pacific Trust Fund and will also support micro, small and medium-sized enterprises by expanding access to microinsurance aimed at reducing climate-related financial risks.

Source: FSX Business News