Bundling Insurance and Credit for Smallholder Farmers
BY BLUE MARBLE MICRO
REGION
Latin America
INDUSTRY
Financial Services
PARTNERS
Financial Institution
CATEGORY
Modeling, Covering
SERVICE
Insurance
RISK
Excess Rainfall and Drought
STRUCTURE
Micro
IMPACT
Climate resilience and adaptation
Challenge
Climate events such as droughts, floods, and storms create risks that cascade from smallholder farmers to the financial institutions that serve them. For farmers, a failed harvest can significantly impact income and savings which in turn creates difficulties in repaying loans or investing in future productivity. For lenders, this translates into higher default rates, increased portfolio volatility, and in some cases, significant financial losses concentrated in rural lending portfolios. Without reliable mechanisms to manage this risk, financial institutions often retreat from agricultural finance or raise the cost of credit which further constrains farmers’ access to credit and ability to adapt to increased risk.
Solution
To address these vulnerabilities, Blue Marble has developed a model where credit for smallholder farmers is bundled with agricultural insurance. By linking loans directly to weather-based coverage, farmers receive protection against climate shocks such as drought or excess rain, while lenders gain greater confidence in the repayments. When payouts are triggered, the insurance helps cover outstanding loan obligations and provides farmers with additional funds to recover and replant. This integrated design reduces risk for financial institutions and lowers the barriers for farmers to access credit on affordable terms.
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