African Risk Capacity Limited (ARC), a specialised agency of the African Union, and the International Finance Corporation (IFC), the private sector arm of the World Bank Group, have signed a Letter of Engagement to strengthen agricultural insurance solutions across the continent.
The partnership aims to create a more secure and attractive investment environment for agriculture by addressing the risks posed by climate change and other uncertainties.
The agreement was signed at the Marriott Hotel Melrose Arch in Johannesburg, South Africa, in the presence of Lesley Ndlovu, CEO of ARC Ltd., and Sérgio Pimenta, IFC Vice President for Africa, along with their teams.
Agriculture plays a central role in Africa’s economy, providing livelihoods for millions. However, farmers and agribusinesses face significant obstacles in securing funding due to the high risks associated with erratic weather, market volatility, and limited financial safety nets.
In Africa, approximately 183 million hectares of cultivated land exist, but 95% of it is dependent on rainfall, leaving the sector highly vulnerable to climate fluctuations. The World Bank forecasts that food demand will rise by 70% by 2050, requiring substantial investments in agriculture.
Despite this, less than 5% of Africa’s farmland is irrigated, and limited access to financing remains a major barrier. Without effective risk management solutions, many potential investors remain hesitant, leaving farmers exposed and food production unstable.
The collaboration between ARC Ltd. and IFC seeks to address these challenges by developing comprehensive agricultural insurance solutions that will help farmers, financial institutions, and agribusinesses better manage the risks they face.
This initiative will support the IFC’s Africa Inclusive Insurance Program (AIIP) by introducing insurance products designed to protect farmers from climate-related shocks and other uncertainties. The goal is to mitigate financial losses while also encouraging greater investment in agriculture, leading to increased food production and improved food security across Africa.
The partnership will focus on key areas, including identifying priority regions for agricultural insurance, developing customised insurance products, and collaborating with governments, financial institutions, and AgTech providers to expand access to risk protection.
By ensuring that farmers and businesses can recover quickly from losses, this initiative will create a more resilient and productive agricultural sector across the continent.
“This partnership is an important step in our mission to strengthen Africa’s resilience to climate and financial risks,” commented Lesley Ndlovu, CEO of ARC Ltd. “By working with IFC, we can scale up agricultural insurance solutions and provide farmers with the confidence to invest in their future.”
Sérgio Pimenta, IFC Vice President for Africa, said: “Agriculture is central to Africa’s economy and food security. Supporting food security and nutrition of the continent is an important priority for IFC in Africa which reflects our commitment to fostering economic development and resilience in the region.
“With this collaboration, we are creating insurance solutions that will protect farmers and attract the investments needed to drive sustainable growth in agriculture.”
