Climate insurance startup running out of funds amid USAID freeze

Oko Finance, a startup providing climate insurance in Africa, has told The Insurer it is seeking investment and considering a sale after funding it expected to receive from the U.S. Agency for International Development was frozen.

Oko was among the companies supported by USAID's Climate Finance for Development Accelerator. The initiative awarded funds to private sector enterprises to develop and scale new solutions for climate adaptation that could become self-sustaining in the future.

U.S. President Donald Trump paused most foreign aid spending in a January 20 executive order that called for disbursements of development assistance funds to be halted for up to 90 days, pending a review of each programme for efficiency and consistency with U.S. foreign policy.

Oko planned to use funding approved by USAID to continue developing and distributing its parametric insurance products, which trigger automatic payouts to farmers after drought or heavy rainfall events.

The startup provides insurance polices across Mali, Ivory Coast, Uganda, Mozambique and Angola in partnership with insurers including Allianz. It distributes them through partnerships with mobile wallet operators, financial institutions and food and agri-businesses whose producers are exposed to climate risks.

"Since launch in 2020 we have insured more than 31,000 unique farmers," said co-founder and CEO Simon Schwall. "We paid $329,000 in indemnities to close to 8,000 farmers, who would have been left without any support otherwise."

OKO'S EXPERIENCE

The company was working on three USAID-funded projects, Schwall said. One was a $216,340 contract signed last year to develop new products in Ivory Coast and reach more farmers in different areas. Of those funds, Schwall said $57,405 had been disbursed before the contract was suspended abruptly.

Oko had also recently "obtained all the approvals" for another USAID project in Mali worth $489,258, he said. This was about to be signed in January, a process that was also suspended. A third project in the Republic of the Congo was not fully confirmed yet but could have brought another $300,000 in funding.

"So now we have lost most of our expected revenues for 2025, and we are left with not much of a runway," Schwall said.

"In Mali and Ivory Coast, we are quickly running out of funds. We scaled down our operations to adjust to the lower volume of activities so many recruitments were cancelled and many existing team members have been put on leave. We are only keeping the necessary capacity to honour our commitments with clients and partners."

Oko's management team is now focused on finding new sources of growth or funding so that the company can maintain its operations until new projects start. Schwall said the company is looking for development organisations and NGOs that want to use this opportunity to finance projects that are ready to be rolled out.

He added that Oko can offer favourable terms to interested investors, or could even discuss an acquisition. "With the backing of a larger group we could overcome the current difficulties without scaling down and compromising future growth."

WIDER IMPACTS

Other projects affected by the USAID freeze reported by Reuters include anti-narcotics programmes in Mexico and tests of a potential HIV vaccine in South Africa.

In the executive order that paused most foreign aid spending, Trump said the U.S. "foreign aid industry and bureaucracy are not aligned with American interests and in many cases antithetical to American values".

The U.S. administration's actions toward USAID have been the subject of several legal challenges. A temporary court order on February 13 ruled that USAID may not enforce Trump's executive order through blanket suspensions or cancellations of contracts or grants, but could enforce the terms of particular agreements.

On February 19, the administration said it was complying with the court order, but had so far determined that all its contracts and grants allowed it to cancel or suspend them. Two non-profit groups have since asked a judge to hold U.S. officials in contempt of court for what they described as "brazen defiance" of the order.

A state department spokesperson said that each aid programme is undergoing a review. They added that programmes that serve U.S. interests would continue, but those not aligned with the country’s national interests would not.