In a remote Georgian village near the Armenian border, Merujhan Karakhanian cultivates more than just potatoes—he cultivates possibility. On less than a hectare of land, he produces 18 tons of potatoes annually. In a good year, that brings in around $5,500—just enough to support his seven-member family. But agriculture, especially at a smallholder scale, is always a gamble. One frost, one hailstorm, and the game changes.

Like many farmers, Karakhanian found himself stuck between risk and resource. In 2012, he tried to break the cycle by applying for a loan to upgrade his seeds. He was denied—no collateral, no credit.

That moment marked the beginning of a smarter solution.

With support from USAID’s Economic Prosperity Initiative, a partnership between a Georgian bank and an insurance company piloted a new idea: crop insurance that could stand in for collateral. The approach was simple but powerful. By reducing risk for lenders, crop insurance unlocked credit for farmers like Karakhanian who had long been locked out of formal finance.

“More than half of Georgia’s workforce lives in rural areas,” said Rezo Ormotsadze, a project specialist with USAID. “But less than one percent of bank loans go to the agricultural sector. We needed a tool to change the math for banks—and the future for farmers.”

The crop insurance didn’t just protect crops—it protected the possibility of growth. If frost, hail, or rain wiped out a harvest, the insurance covered the loan. The farmer didn’t default. The bank didn’t lose its investment. And the land stayed productive.

For Karakhanian, this meant a second chance. With his insurance-backed loan, he bought high-quality seeds. That season, he increased his yields. He earned more. And when the next storm hit, he wasn’t forced to abandon his land—he was covered.

Building Resilience from the Ground Up

This wasn’t just about one farmer. It was about building a system—an industry—that could scale. Before the pilot, crop insurance was virtually nonexistent in Georgia. Premiums were prohibitively expensive. Few insurance providers knew how to assess risk in agriculture. Farmers didn’t see the value. And without government subsidies, the model seemed out of reach.

USAID stepped in with targeted support: training for insurers, policy design for specific crops, and co-financing to lower premium costs during the pilot phase. By the third year, farmers would be paying 75% of the cost—just enough skin in the game to make the model sustainable.

The early numbers told a compelling story. Forty farmers in Karakhanian’s region followed his lead. Within a year, over $1.2 million in loans were expected to reach 1,000 farmers growing everything from hazelnuts to beets. The government began to take notice, initiating conversations around subsidizing premiums.

“This model reduces default risk, expands our client base, and spreads administrative costs with our insurance partner,” said Irakli Moistsrapishvili of the Bank of Georgia. “It’s a win-win-win—for us, for farmers, and for the country.”

What Risk Management Really Means

In the summer of 2012, a hailstorm devastated crops across Georgia. Karapet Ezoyan, one of Karakhanian’s neighbors, had opted into the pilot and received a $5,000 payout—enough to cover his loan and continue farming. Another neighbor, uninsured, lost everything.

The difference wasn’t just insurance. It was the opportunity that insurance unlocked: to borrow, to invest, and to try again.

As Karakhanian put it: “I no longer fear the sky. With this support, my business and my family can weather the storms.”

Lessons in Systems Change

The success of the pilot offers a clear takeaway: resilience is built, not wished for. It comes from aligning incentives—between banks, farmers, insurers, and governments—and reducing friction at the points where risk kills opportunity. The real power of this project isn’t just that it protected a harvest. It seeded a new way of thinking about how we finance agriculture, and how we value the people who feed us.