Global Shield Financing Facility Impact Story: Protecting Poor and Vulnerable Households in Malawi

Malawi, ranked by the World Bank as the fourth poorest country globally, faces significant socioeconomic challenges, which are exacerbated by climatic events. Recent El Niño-induced floods and droughts have devastated the agricultural sector, pushing approximately 40 percent of the population toward acute hunger. The Global Shield Financing Facility (GSFF) plays a crucial role in strengthening Malawi’s resilience by supporting systems that protect the most vulnerable communities during such catastrophic events.

A US$21 million GSFF grant has been instrumental in supporting two crisis and disaster risk finance and insurance (CDRFI) instruments that enable Malawi’s flagship Social Cash Transfer Programme (SCTP) to scale up for emergency response. Approximately 120,000 households currently enrolled in the cash transfer and Climate Smart Public Works Program are eligible for additional cash when objective indicators of drought are met. The scaling mechanism that increases benefits is supported by the World Bank Social Support for Resilient Livelihoods project, with US$312.5 million of International Development Association (IDA) financing allocated to strengthen Malawi’s social safety net program.

The GSFF grant enhances the shock-responsive aspects of the program and funds risk transfer instruments to ensure more money is available in the worst years. This aid is crucial, particularly for the poorest, who are most vulnerable during crises. A US$21 million contingency fund currently protects up to 1.2 million people from moderate droughts, while a US$11 million macro/sovereign risk transfer instrument protects an additional 600,000 people from severe droughts for a period of two years. Since the grant’s inception, drought has led to four scale-ups of the SCTP, which have provided more than 248,000 households with emergency cash transfers.

Highlights

• A US$21 million GSFF grant has been instrumental in supporting two DRF instruments that allow Malawi’s flagship SCTP to scale up and be used for emergency response.

• In August 2024, payouts were made in 10 districts, totaling US$11.9 million, using insurance (US$6.6 million) and contingency funds, covering an estimated 142,000 households and providing funds to buy food and resources protecting around 700,000 people.

• For the 2024/25 season, the shock-responsive social protection mechanism was triggered for Ntcheu district, resulting in a total payout of US$ 2,356,063, which provided support to 26,282 households.

To design the SCTP mechanism, the Government of Malawi made key decisions on parameters, including the frequency and types of events that would trigger the mechanism, the number of people it would cover, and the amount of assistance it would provide. Once parameters were selected, the government established rules for implementing this innovative SCTP scalable mechanism and included them in a publicly available, annually updated Scalable Handbook.

The GSFF grant has also supported improved payment and registration systems for beneficiaries, as well as capacity building, legal reforms, and the codification of standard operating procedures for CDRFI instruments.