World Bank Approves $125M Grant for Somalia’s First Drought Index Insurance

The DPF aims to provide microfinance access to lower-income groups, particularly pastoralists in climate-vulnerable sectors such as agriculture, fisheries, and micro businesses.

The World Bank’s Board of Executive Directors has approved a $125 million Development Policy Financing (DPF) grant to introduce drought index insurance for 180,000 pastoralists in Somalia, including 90,000 women. This grant, funded by the International Development Association (IDA), represents the first phase of a two-part program designed to enhance revenue generation, debt management, and public spending accountability while promoting climate-smart investments.

The DPF aims to provide microfinance access to lower-income groups, particularly pastoralists in climate-vulnerable sectors such as agriculture, fisheries, and micro businesses. The initiative also focuses on expanding access to greener and more affordable electricity and supporting fisheries development to tap into new growth opportunities. The grant will assist the Somali government in financing essential public services.

“This DPF underscores the government’s dedication to advancing crucial structural reforms post-HIPC Completion Point, setting the stage for a more stable and sustainable future,” stated Kristina Svensson, World Bank Country Manager for Somalia.

The reforms supported by this operation are in line with the World Bank’s broader engagement strategy for Somalia and align with the World Bank’s Country Partnership Framework for Somalia (FY24–28). This program is part of the World Bank’s efforts to help Somalia build a more stable, accountable state, promote inclusive private sector growth, and enhance resilience. The long-term goal is to restore the social contract and aid Somalia’s recovery from fragility, conflict, and violence.

The success of this DPF is closely tied to the World Bank’s existing portfolio and investments from other development partners. It also aligns with corporate commitments on climate co-benefits, reducing gender disparities, and maximizing finance for development.

The approval of this grant comes as Somalia grapples with multiple shocks that undermine economic growth and contribute to widespread poverty. As the world’s second most climate-exposed country, Somalia faces increased frequency and severity of droughts and floods, exacerbating its social and political vulnerabilities.

“Sustainability in public finances, supported by this DPF, is essential for economic resilience. Strengthening domestic revenue mobilization, improving public debt management, and enhancing accountability in public spending are foundational steps for securing adequate development funding and ensuring macroeconomic stability,” said Stella Ilieva, Task Team Leader and Senior Economist.