The United Nations Capital Development Fund (UNCDF) welcomes the Fijian Government’s decision to grant a value added tax (VAT) exemption for premiums on climate and disaster risk parametric insurance products.
A 2020 UNCDF study on the ‘Economic Impacts of Natural Hazards on Vulnerable Populations in Fiji’ identified insurance as an important tool for managing risks associated with natural hazards.
The UNCDF, through the Pacific Insurance and Climate Adaptation Programme (PICAP), has developed the region’s first parametric micro-insurance product that is being rolled out to cover smallholder farmers, fishers, and market vendors in Fiji.
The exemption, announced during the National Budget address last Friday 16th July 2021, will provide financial relief to low-income households and small businesses at a time of economic distress due to the COVID-19 pandemic.
“To support this groundbreaking initiative, VAT exemption will be provided to all climate and disaster risk micro-insurance products,” said the Attorney-General and Minister for Economy, Aiyaz Sayed-Khaiyum.
“By making these products more affordable, we extend them to low-income and vulnerable sectors previously beyond the reach of mainstream insurance.”
The Pacific Insurance and Climate Adaptation Programme receives financial support from the Governments of New Zealand, India and Australia, and the Fiji-based initiatives are also supported by the Climate and Energy Fund of the Government of Luxembourg.
The micro-insurance product developed by PICAP is being piloted to initially cover 500 sugarcane, rice, coconut and root crop farmers, fishers and market vendors.
It will then be scaled up to cover 1000 beneficiaries before the start of the 2021/2022 cyclone season in November.
This will provide immediate post-disaster cash relief to beneficiaries and will also support Fiji and the region’s efforts to build financial resilience among low-income households.
“The VAT exemption on parametric insurance premiums is a landmark policy initiative and we are grateful to the Government for accepting our submission in this regard,” said PICAP Programme Manager, Krishnan Narasimhan.
“It will directly benefit insurance customers, in particular small-holder farmers, fishers and market vendors as they save on the tax component of insurance premiums and in these challenging times, that is indeed a big saving.
“This announcement also sends a strong signal to the insurance industry, and the private sector, that Government is highly supportive of this important initiative and will catalyze the market towards innovation.”
The Pacific Insurance and Climate Adaption Programme is jointly administered by UNCDF, the UN Development Programme and the UN University Institute for Environment and Human Security.
The UN Capital Development Fund (UNCDF) makes public and private finance work for the poor in the world’s 47 least developed countries.
With its capital mandate and instruments, UNCDF offers “last mile” finance models that unlock public and private resources, especially at the domestic level, to reduce poverty and support local economic development. UNCDF’s financing models work through two channels: financial inclusion that expands the opportunities for individuals, households, and small businesses to participate in the local economy, providing them with the tools they need to climb out of poverty and manage their financial lives; and by showing how localized investments—through fiscal decentralization, innovative municipal finance, and structured project finance—can drive public and private funding that underpins local economic expansion and sustainable development.
By strengthening how finance works for poor people at the household, small enterprise, and local infrastructure levels, UNCDF contributes to SDG 1 on eradicating poverty and SDG 17 on the means of implementation. By identifying those market segments where innovative financing models can have transformational impact in helping to reach the last mile and address exclusion and inequalities of access, UNCDF contributes to a number of different SDGs.