This paper illustrates how weather derivatives indexed to forecasts of famine can be designed and used by operational agencies and donors to facilitate timely and reliable financing, for effective emergency response to climate-based, slow-onset disasters such as drought. We provide a general framework for derivative contracts, especially in the context of index insurance and famine catastrophe bond, and show how they can be used to complement existing tools and facilities in drought risk financing through a risk-layering strategy.

This strategy takes into account the new market opportunities being created for small-scale livestock producers by increasing local and global demand for high-quality livestock products (termed the Livestock Revolution) and the many pathways by which livestock has traditionally reduced poverty.