The Malawi Climate and Disaster Risk Finance (CDRF) Workshop, held on October 14, 2024, brought together a diverse array of stakeholders to discuss Malawi’s experience with climate and disaster risk financing, share lessons, and explore future pathways for improving financial resilience. Hosted by Malawi’s Ministry of Finance and Economic Affairs (MoFEA) and the World Bank, the event featured active participation from both Malawian and Zambian government officials as well as key international organizations.

Background:

CDRF involves using pre-arranged financial mechanisms to help nations manage the financial burden of natural disasters and climate-related shocks. Malawi, one of the first countries in the region to adopt a national CDRF strategy, has made significant strides since the strategy's launch in 2019. Key CDRF instruments in Malawi include:

• Two World Bank Catastrophe Deferred Drawdown Options (CAT DDO), which provided critical liquidity during the 2020 COVID-19 crisis and the 2024 El Nino disaster.
• A scalable safety net mechanism, supporting vulnerable populations during disasters, funded by a contingent budget line and backstopped by parametric insurance from African Risk Capacity Limited (ARC Ltd.).
• Sovereign drought insurance through ARC Ltd., with funding support from the African Development Bank.
• The Disaster Risk Management Fund, established through recent legislation and soon to be operational.

These tools have bolstered Malawi's proactive disaster risk financing approach, reducing reliance on costly post-disaster funding and improving resilience. The Government of Malawi has also expressed interest in joining the second phase of the Regional Emergency Preparedness and Access to Inclusive Recovery (REPAIR) program in July 2025 to access a broader range of disaster risk instruments. In addition, Malawi is the first country to sign up for the Rapid Respond Option.

As Malawi’s 2019-2024 CDRF Strategy concludes, the government is evaluating its progress, assessing continued funding gaps to update the strategy and allow for new instruments, such as those from the World Bank’s Crisis Response Toolkit and the REPAIR program.

Key Objectives of the Workshop:

1. Share insights and lessons learned from past CDRF initiatives in Malawi, highlighting successes, and challenges.
2. Review initial findings of Risk Layering analysis performed in collaboration with the World Bank to support their updated CDRF strategy,  
3. Exchange experiences with Zambia as they develop their CDRF strategy.
4. Discuss future directions and priorities aimed at advancing CDRF in Malawi, including those from the World-Bank-financed REPAIR project, with regional implementer ARC Ltd.
5. Receive an update on the Global Shield Against Climate Risks in-country process from the government coordinator.

Outcomes:

• Comprehensive Review of CDRF Tools in Malawi: The workshop helped to evaluate the current suite of tools Malawi uses and identify areas for enhancement. It underscored the importance of integrated risk layering to optimize financial protection against varying disaster risks.
• Insights from Zambia’s Experience: Zambia’s contribution enriched the dialogue, particularly with lessons from its 2024 drought response. The severe drought led to payouts from limited pre-arranged CDRF instruments, including a US$10 million ARC sovereign drought insurance payout. Acknowledging remaining protection gaps, Zambia received a US$200 million grant from the World Bank’s Crisis Response Window. The government recognizes the need to transition from reactive to proactive CDRF mechanisms.
• Global Shield Integration: Discussions on the Global Shield highlighted its potential to provide additional funding and risk management solutions for Malawi. The Shield’s emphasis on addressing protection gaps for vulnerable countries resonated strongly, with participants agreeing to explore ways to integrate it into Malawi’s updated CDRF Strategy.
• Risk Layering Optimization: The workshop delved into a risk layering analysis that aims to refine Malawi’s financial approach to disaster response. This analysis helps ensure the right financial tools are used at different stages of a disaster, improving cost efficiency and ensuring faster payouts.
• Future Strategy Enhancements: Based on the lessons and discussions, participants agreed on the need to broaden Malawi’s CDRF strategy. Potential next steps include increasing private sector engagement in disaster financing, leveraging the REPAIR program, and seeking further support from global initiatives like the Global Shield and Crisis Response Toolkit.
• Strengthened Regional Collaboration: The workshop reinforced the need for continued knowledge exchange between Malawi, Zambia, and international partners. Strengthening cross-border partnerships in disaster risk management will be critical as the region faces growing climate risks.

The workshop emphasized the importance of sustained efforts and regional cooperation to strengthen disaster resilience through innovative financial tools and strategies.

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