Innovative financing for building community resilience to climate change

[12 December 2011] - “Innovative financing for building community resilience to climate change in coastal Viet Nam” is a project of the SNV (Netherlands Development Organisation) Vietnam and is funded by the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) of Germany.

This is a contribution to the international climate change initiative (ICI), an effort to respond to climate change by supporting vulnerable communities to effectively adapt to and reduce potential climate risks. Since 2008, the German Federal Government allocates parts of the revenue from auctioning emissions trading allowances to finance the National and International Climate Change Initiatives. With an annual budget of 120 Mio. EUR, the initiative funds projects on greenhouse gas reduction, forest conservation and adaptation to climate change in developing, emerging economies and transition countries. Priority is given to innovative and replicable solutions that have an impact beyond the individual project. ICI supports projects in the following areas:

Building a climate friendly economy
Adaptation to climate change (under this area is the topic of financial safeguards against the effects of climate change and thus the SNV-implemented project),
Conservation and sustainable use of natural carbon reservoirs/reducing emissions from deforestation and forest degradation (REDD+).

The SNV-project in Vietnam is implemented in five communes of Nghe An Province, from January 2011 to January 2014.

The overall goal of the project is to reduce poverty by increasing the adaptive capacity of local communities to the effects of climate change, with the following specific objectives:(i) Capacity building on climate change; (ii) Improving resilience for agriculture livelihoods; (iii) Promoting PES and forest management; and (iv) Weather risk insurance scheme development and application

SNV has contracted the partnership between Micro Insurance Academy (MIA) and Economica Vietnam, as experts in the field of micro insurance and finance, to contribute technical advisory to implementation of the project. Especially, the partnership will:

Contribute to the implementation of the “Innovative financing for building community resilience to climate change in coastal Viet Nam” and achieving the projects goals;
Carry out detailed analysis of the agricultural micro-insurance and finance sector in Viet Nam;
Develop and test agricultural micro insurance product(s) and potential insurance subsidy scheme;
Contribute to stimulating the emergence of a domestic insurance market and promoting dialogue and partnerships;
Raise awareness about the role and benefits of agricultural micro insurance at the local and national levels.

As one of the first steps, a joint mission by MIA and Economica experts have been completed. The mission helps to Develop a detailed understanding of current and potential suppliers of agricultural micro insurance in Vietnam (commercial, government and civil-society; primary insurers and reinsurers), particularly focusing on the risks induced/increased by climate change. It also strengthens the understanding of the target group’s preferences for agricultural insurance (crop, livestock) and assess the willingness to pay for such insurance. The mission also sketches out initial options where (existing or potential) supply and demand can meet.