1. Overview William Dick Commodity Risk Management Group Agriculture and Rural Development Department World Bank Johannesburg, April 2009 Managing Risk in Financing Agriculture - Expert Meeting

2. Agri/Agbiz = Risky Business  Risk + uncertainty widespread in food/ agri system :  Agro-climatic factors  Complex biological/environmental processes  Geographical span of supply chains  Political economy of food/agriculture  Major structural and demographic changes  Risky business = ‘old risks’ + ‘new risks’  ‘Old Risks’: weather, price variability, pests, logistical bottlenecks, food safety hazards, policy shifts  ‘New Risks’: climate change, new disease transmission, biosafety, bioterrorism, environmental imprint + social concerns

3. 3 Managing Agricultural Risk TIME FRAME Before the Event EX ANTE Event Occurs After the Event EX POST STRATEGIES INFORMAL Individual- or Community-based FORMAL Market- or Policy-based INFORMAL Individual- or Community-based FORMAL Market- or Policy-based

4. Issues common to finance and insurance Needs for risk assessment and data Needs for risk assessment and data Ex ante risk planning and ex post risk solutions (financing) Ex ante risk planning and ex post risk solutions (financing) Risk retention, risk transfer, “layering” of risk Risk retention, risk transfer, “layering” of risk Technical, organisational and financial planning Technical, organisational and financial planning Packaging/bundling of credit and insurance Packaging/bundling of credit and insurance Entry points and distribution Entry points and distribution Appropriate insurance products Appropriate insurance products Collateral enhancement Collateral enhancement Legal and regulatory Legal and regulatory Public/private roles Public/private roles Profitability in the supply chain Profitability in the supply chain

5. Country Agricultural Risk Management Model Country Agricultural Risk Management Agri-business segmentation Social vs commercial insurance Traditional farming sector Emerging farming sector Commercial farming sector Agricultural risk assessment Risk identification Risk quantification Probabilistic agricultural risk model Agricultural risk financing Risk layering Insurance index Insurance pool Insurance and rural finance Institutional capacity building Data management Regulatory/supervisory framework Information and education Technical expertise Program administration and monitoring

6. EffectFactorsRisk Lower yields and loss of income/assets Rainfall and temperature variability or extreme eventWeather Lower prices and loss of income Market forces inside and outside the country; local and international supply and demand Price Reduced yield; loss of assets/income Disease, pest, contaminationBiology Loss of incomeIllness, death, injuryLabor Loss of income; market dissatisfaction Breakdowns, bottlenecks, price shifts for product storage and transport Logistical Changes in costs, taxes and market access Regulatory changes or inconsistent application, both inside and outside the country Regulatory/ Policy Major Agricultural (Supply Chain) Risks