ADB extends grants of $9.25 million for rollout of Climate Disaster Risk Financing in Malawi

Malawi: The African Development Bank's Board of Directors has approved two $9.25 million grants to Malawi to implement the Africa Disaster Risk Financing Programme (ADRiFi). The move will strengthen the country's resilience in the face of climate-related shocks and food insecurity.

Under the Africa Disaster Risk Financing Programme, the funding will assist the government of Malawi in developing climate risk management solutions and paying its sovereign risk premium for the transfer of drought risks.

The initiative, a collaboration between the African Development Bank and the African Risk Capacity Group (ARC), improves countries' preparedness and financial resilience in the face of climate change by encouraging participation in the ARC's sovereign risk pool.

The presence of ADRiFi in Malawi will help to protect the country's smallholder farming communities, including women and children, from the worst effects of drought.

The African Development Fund will make the first grant of $4.9 million. The second grant, worth $4.35 million, will be funded by the ADRiFi Multi-Donor Trust Fund.

The grants will fund the first of two phases of the programme, which will run from 2022 to 2023. Malawi's government and ARC will also contribute to the total cost of $10.13 million for Phase 1 of the programme.

“Africa is the world’s region most vulnerable to climate change-related weather extremes like flooding, droughts and tropical cyclones,” said Dr. Beth Dunford, the Bank’s Vice President for Agriculture, Human and Social Development. 

“We welcome Malawi into the Africa Disaster Risk Financing Programme, which boosts participating countries' ability to respond rapidly to the aftermath of climate-related disasters, arrange finance before shocks and better serve their most vulnerable populations impacted by the effects of climate shocks."

Agriculture accounts for approximately 30% of Malawi's GDP and employs approximately 64% of the workforce. The agriculture sector of the country is primarily dependent on rainfall.

However, due to climate variability, rainfall patterns have become more erratic and difficult to predict, and climate-induced shocks are expected to become more frequent and severe, particularly in southern Africa.

This has made rural residents, including farmers, and the overall economy more vulnerable to weather-related shocks.

ADRiFi will protect investments and development gains in Malawi related to five Bank agricultural projects, including infrastructure rebuilding after a disaster. Grant funds will also be used to strengthen the capacity of national disaster risk management agencies.

The disaster risk initiative's implementation is in line with the country's 2019-2024 Disaster Risk Financing Strategy, which identifies insurance as a tool for mitigating the risks of climate disasters. It also advances Malawi's Vision 2063, which aims to promote a transformative agriculture sector that is smart and climate-resilient.

Malawi is the ADRiFi program's ninth member country. Gambia, Mauritania, Niger, Sudan, Madagascar, Mozambique, Zambia, and Zimbabwe are also represented. Madagascar, Mauritania, and Niger have already received insurance payouts totalling $17 million as part of the initiative. The funds were used to help with recovery efforts after droughts and tropical cyclones.

The Africa Disaster Risk Financing Programme helps African countries assess climate-related risks and costs, respond to climate-related disasters, and assess adaptation measures. The initiative also provides initial funding to countries in need.

ARC is an African Union specialised agency that assists African governments in improving their capacity to better plan for, prepare for, and respond to extreme weather events and natural disasters.

The ADRiFi Multi-Donor Trust Fund is managed by the bank, with contributions from the United Kingdom and Switzerland.

Together with the African Development Fund, the fund makes resources available to support African countries' premium payments in order to protect their vulnerable populations, increase the number of participants in the risk pool, and make the African Risk Capacity an effective pan-African initiative.