A Contingent Line of Credit (CLOC) is a new financial instrument tailor-made for microfinance institutions and their smallholder clients and a powerful addition to a portfolio that charts a future of business growth.
This MRR Concept Note builds out how blended indexed financial tools work in practice, providing additional guidance on how each indexed tool works in good and bad years, as well as how a long-term package can change over time to meet farmers' needs.
A flexible blend of three indexed financial instruments to manage risk have the potential of meeting a rural family’s circumstances and need, strengthening their resilience across their journey to prosperity.
Rigorous field trials across Africa show that agricultural index insurance can stabilize small-scale farmers financially after a shock and even increase their agricultural investments, both of which could improve productivity and profitability in the West African cotton value chain.
USAID-supported research from Bangladesh in partnership with BRAC found that households pre-approved for an indexed line of credit in the event of a flood disaster had higher consumption and productivity, paired benefits previously only found with insurance.
National governments can pre-finance support with disaster risk insurance, but there has been no objective way to determine whether it is more effective than paying the costs as they arise. New research has found a way to evaluate risk insurance and to build a metric for improving contract design.
Small-scale farmers often don't adopt technologies that build resilience, like stress-tolerant seeds and index insurance, because they don't provide benefits in every year. New research shows how to maximize learning with these technologies to quickly build lasting adoption and long-term resilience in rural communities.
Resilience+ (also Resilience-Plus) describes when rural families are more immediately able to withstand a shock and when that knowledge increases their investment in agricultural productivity. Generating Resilience+ could accelerate efforts to reduce poverty and spur agricultural growth.
