Smallholder Crop Insurance in East Africa: A New Way Forward

Smallholder farmers in East Africa are increasingly vulnerable to risks associated with changing weather patterns. Climate insecurity puts their livelihoods in jeopardy and discourages investment in new technologies. As recent studies have explored, viable business models for crop insurance have the game-changing potential to reduce risks for the 2 billion people that depend on smalholder farms for income and subsistence.

Despite the promise, attempts at developing crop insurance have been rife with complications. Pilot programs have failed to scale for a number of reasons, including: insufficient climate data, low uptake due to lack of affordability as well as poor product design, unfavorable policy environments, high operational costs, and lack of scientific research to determine risk. The few that show scalability, such as the R4 Rural Resilience Initiative in Ethiopia (R4) and ACRE in East Africa, have done so by building inclusive participatory processes with strong institutional partners and by integrating insurance into other risk reduction offerings, but they continue to face a number of challenges, especially with regards to data availability, high operati
onal costs for installing and maintaining independent weather stations, and independent risk assessment.

As an implementing partner with Tetra Tech ARD for USAID/Kenya and East Africa’s PREPARED Project, SSG has developed a comprehensive public-private partnership between Jubilee InsuranceEast Africa, Kenya Meteorological Department (KMD), Rabobank, UNFAO and others to design and launch an Index-Based Weather Insurance product referred to as “Kinga Kilimo” (“Protect Farming” in Kiswahili). The product is designed to provide ICT based Agro-weather advisory to farmers via SMS prior to climatic events to provide forecasts for land preparation, timing for planting, crop variety and cultivars, crop management (fertilizer, pesticide application, cultivation, water supplementing), postharvest management, and soil conservation. It also offers parametric Weather Based Index Insurance for risk management of crop production losses associated with extreme weather events.

Both the partnership and the product are intended to address the challenges and to incorporate lessons learned from the previous attempts at crop insurance. As such, PREPARED has designed the partnership around several critical innovations to maximize success in designing a crop insurance product:

Incorporate Weather Data: To overcome the limiting factors of data quality, the partnership provided capacity building to the Kenya Metrological Department (KMD) in order to produce a blended weather dataset that incorporates over 35 years of data. This dataset uses Potential Evapotranspiration (PET) and GeoCLIM – a geospatial climate data-management and analysis software tool that integrates observed station data with satellite-derived estimates – so as to address both ex-ante and ex-post risk faced by the farmer at farm level.

Few, if any, crop insurance schemes have had such a comprehensive investment in improving data collection. Mr. Francis Ngari, the Micro-Insurance Manager at Jubilee Insurance, explains the value-added from this approach, noting, “We see this shared value approach to partnership as a big breakthrough in designing crop insurance. Previously we have had challenges accessing climate data and engaging with the Kenya Meteorological Department in designing crop insurance products, however, this partnership has made this possible. Getting credible and more robust blended data from KMD has made our premiums lower and improved the credibility of our products.”

Improve the Service Provision of Government Partners:  Guided by SSG Partnership Specialist Polycarp Ngoje, the  PREPARED project has helped transform the culture of the Kenya Meteorological Department through PREPARED’s Quality Service Improvement Program (QSIP) to be service-oriented and to focus more on potential collaboration and partnership to enhance usage of weather data.

Peter Ambenje, Director of KMD, reflects on the importance of this shift in orientation, stating that “The innovative approach to the partnership design of the Weather Index Insurance Kinga Kilimo product has opened our eyes on how we can engage with the private sector and generate products that add value as opposed to just sharing climate data. The Quality Service Improvement Program (QSIP) has changed the approach and mindset of our staff as far as service delivery is concerned. We look forward to adopting this model in engaging with other partners moving forward.”

Mr. Ngari attests that this partnership is “a breakthrough in agriculture insurance.” The United Nations Food and Agricultural Organization (UNFAO), which has contract farming for legumes and pulses in Eastern Kenya, has also found this partnership approach useful to them for downscaled weather forecast and climatological zoning based on historical data and water requirement satisfaction indexing for various crops. According to Philip Mwangi in the program office in Machaon County, “the partnership has been the missing puzzle [piece] in the contract farming. The scientific tools and downscaled agro weather advisory tool is a great avenue to disseminate crop management information to the farmers from land preparation to post harvest management.”

The new product is being test-marketed in several counties in Kenya this fall with the goal of rolling it out across much of the country for the spring growing season. It is expected to reach over 15,000 smallholder farmers in these pilots alone. Perhaps more importantly, though, the lessons learned from this partnership – including the need to bring the right partners together, the importance of using proper climate data as a base, and the need for government agencies to understand shared value and service provision – could transform crop insurance across all of Africa.

A Multi-Pronged Approach to the Growing Pains of Value Chain Development in Timor-Leste

By Colin Foster and Jeff Halvorson

Like other mountainous and geographically-isolated countries, Timor-Leste suffers from a lack of financial and technological services essential to the creation of a healthy, competitive agricultural market. Therefore, finding solutions to sustainable agriculture production in Timor-Leste is all about identifying missing links/gaps in the marketplace and building trust through relationships that have commercial benefit for everyone along the horticultural value chain.

Timor-Leste has very few established services, groups, and associations that provide basic market information to farmers and SMEs. In response, SSG Advisors and Cardno Emerging Markets recently began laying the groundwork with leading telecommunications companies to build and launch an agricultural database that will be used by farmers along key horticultural value chains that supply both domestic and export markets. This partnership aims to increase the supply of much-needed products by giving rural farmers access to up-to-date market prices for their produce, weather updates, and guidance on relevant good agricultural practices (GAP). Meanwhile, SSG works with leading agricultural buyers to contribute to the content on this platform and brokers MOUs with these farmers, thereby solidifying the market pull that will incentivize these newly-informed farmers to produce what buyers want, when they want it.

The next step will be helping firms in Timor-Leste’s small private sector sustainably integrate these solutions into their core business operations. To address this objective, results from recent ICT and rural finance assessments will provide insights into the incentives banks, MFIs, and other lending institutions need to facilitate the adoption and implementation of these ICT products. In addition, SSG and Cardno address capacity and financing challenges facing farmers, input suppliers, and wholesalers so these groups benefit from ICT solutions and formal purchasing agreements with leading buyers.

It’s a long-term strategy that involves building the ICT platform infrastructure through multi-stakeholder partnerships between key buyers and sellers so that the former continue using/funding it when the project ends in 2021. We are still at the early stages of this effort but based on interest and commitments thus far, SSG has found a fertile ground for this new technology due to its potential to significantly improve the lives of thousands of Timorese smallholder farmers by connecting them to interested buyers through a transparent system.

Research and Recommendations on Indicators for Agricultural Cooperatives

SSG is pleased to announce the publication of our research report to culminate the Cooperative Research Support Services activity, entitled “Indicators to Measure the Economic Sustainability and Patronage Value of Agricultural Cooperatives: Research and Recommendations” (please see the publication here).

USAID contracted SSG to propose and justify two indicators to measure the impact of assistance to agricultural cooperatives: one indicator for financial sustainability and one indicator for patronage value, or the benefit that individuals receive for being cooperative members. This task was particularly challenging due to the diversity of cooperative experiences across the globe, which makes it difficult to develop widely applicable definitions and metrics, and the limited administrative capacity of many of the agricultural cooperatives with which USAID works.

SSG employed a mixed method approach to identify, filter, test, and assess these indicators. This approach included extensive literature review, key informant interviews with agricultural cooperatives in Guatemala and Kenya as well as subject matter experts and USAID implementing partners in the U.S. and Europe, and survey of subject matter experts. In the absence of an industry standard for designing and testing indicators, SSG developed an indicator rating approach that helped filter through scores of indicators based on data gathered through stakeholder interviews.

Additionally, SSG assessed the indicators based on Participatory Monitoring & Evaluation (PM&E) principles, with a focus on the utility of the indicators to the agricultural cooperatives and the ability of target organizations themselves to collect, report on, and make use of the data. The PM&E lens is aimed at making the process of designing and utilizing indicators a form of building local capacity in the vein of USAID Forward, a strategy within which local organizations develop the ability to increasingly engage with the Agency as implementing partners. SSG’s approach has the potential to advance USAID Forward in that, based on our indicator recommendations, the cooperatives can feel invested in the design of the project and think critically about the effects of USAID assistance.

So, now what? There are several noteworthy next steps that arose from this research. First, during the final presentation to USAID, the report appeared to spark important conversation among the researchers and various USAID stakeholders around how to continue to strengthen the M&E and impact of assistance to agricultural cooperatives. Second, given the objectives of USAID Forward, it will be interesting to explore opportunities to incorporate PM&E principles into other types of activities where target organizations or individuals can assume ownership over the indicator development and reporting process. Third, there appears to be an ongoing opportunity to leverage information and communications technology to inform M&E around cooperative development and other USAID agriculture activities through self-reported data. This capability may be particularly important for indicators regarding small farmer perception of cooperative management, which may be costly or difficult to ascertain through face-to-face surveys due to sensitivities within cooperatives. We are looking forward to leveraging the methodologies and experiences from the Cooperative Research Support Services activity in the future, whether with cooperatives or other areas in which SSG has supported M&E for foreign assistance, such as the security sector.

Leveraging Credit to Drive Input Supply in Timor Leste


The horticulture sector in Timor Leste is hindered by the scarcity of key agricultural inputs and the weakness of the input supply system serving more remote or rural areas. Materials such as seeds, fertilizers, pesticides, plastics, netting, and drip irrigation lines are generally unavailable for purchase outside of the capitol city, Dili. To date, the level of demand for these inputs in remote districts has not been large enough or consistent enough to entice entrepreneurs to invest in input supply. Facilitating access to credit for agriculture is one approach that development actors can take to create an expanded input supply system through increased demand.

Investors of all classes and scales, from microfinance institutions to infrastructure project financiers, have historically viewed the agriculture sector with greater levels of trepidation than other industries. The relative unpredictability of biological systems (not to mention the weather), make associated financial risks difficult to assess. Given this backdrop, what approaches can development actors take in order to lower barriers to agri-lending in Timor Leste?

This presents an opportunity to take a market system approach that engages finance institutions and farmers to lower barriers on both the ‘buy side’ and the ‘sell side’ of the lending equation. On the ‘buy side’, development practitioners can work to enhance the credit-worthiness of farmers by introducing improved technologies and practices, cultivating new market linkages, and expanding access to market information. The deployment of weather-indexed crop insurance can help reinforce this process by reducing the financial risk of crop failure for both the lender and borrower. On the ‘sell side,’ donors can make use of subsidy mechanisms such as credit guarantees and subcontracts to buy down the risk of agriculture-focused credit products. Every lender has different priorities and tolerances, and designing an effective finance partnership is often a matter of determining how to blend ‘buy side’ and ‘sell side’ services and how to set lending targets for the finance provider.

Only when the rural districts of Timor Leste possess a critical mass of buying power will entrepreneurs start to invest in the retail outlets and distribution networks needed to reach that market. Access to credit is a key avenue for enabling the ‘demand pull’ that will spur the growth of a stronger input supply system. Why not start there?

SSG to Build Agribusiness Partnerships in Haiti

SSG is pleased to announce that we are part of the winning consortium for the new USAID Port-au-Prince-Saint Marc Partnership. Chemonics International will be the lead implementer on the new 5-year food security program.

SSG’s Brett Johnson says, “The Port-au-Prince-Saint Marc Partnership represents a new and innovative approach to addressing the food security needs of the Haitian people. We are excited to be working with Chemonics to build market-driven agribusiness partnerships that will enhance lives and livelihoods in Haiti.”

Global Companies See Growth Potential in Sub-Saharan Africa’s Smallholder Farmers

By Isaac Williams

The dichotomy between the potential for agricultural productivity on the African continent and its dismal reality has long vexed governments, development P1030544organizations, and businesses alike. The World Bank has noted that agricultural productivity in Sub-Saharan Africa is routinely less than half that of geographically comparable Latin American and Asian countries. While the average sub-Saharan Africa country has four times the amount of arable land of its typical global counterpart, most African countries are heavily dependent on imports for the provision of staple foods. And the vast majority of food that is grown on the continent comes from smallholder farmers – families working plots of land of up to 20 hectares.

Over the past several decades, development agencies have helped drive significant improvements in the African smallholder farmer’s competitiveness on global markets. Concepts such as value chain development and approaches that focus on the central role of markets and market incentives have gone a long towards improving results of development programs. Nevertheless, success in sustainably increasing agricultural productivity and helping smallholders graduate into successful agricultural entrepreneurs has been halting.

All this is now beginning to change. It is a move led by major regional and global agribusinesses that increasingly see smallholder farmers as valuable new customers and the drivers for staggering forecast growth in the agricultural sector on the continent. Companies have begun adapting some of their core practices and products to this new customer segment. Advertising budgets are now spent on demonstration plots in rural villages, not impressive billboards in cities. Some firms work with NGOs on farmer training programs and tap development finance institutions for credit guarantees that help lower the risk of financing for inputs such as improved seed, fertilizer, and equipment for farmers.

Yet, significant challenges remain. Chief among them is finding cost-effective ways to get quality, appropriate inputs (e.g., seeds, fertilizer, and equipment) to smallholder farmers at appropriate scale, in the right place, and at the right time. And even when farmers are able to use these products to substantially increasing their yields, another hurdle presents itself. Unless local markets are sufficiently efficient and connected to global supply chains and infrastructure to absorb this jump in supply, farmers risk being victims of their own success through a sudden collapse in prices.

Partnerships between smallholders, businesses, and government, as well as innovative approaches to spreading new farming technologies will be central to addressing these challenges.

  • Increased collaboration between aligned businesses. By working together, complementary businesses, such as seed and fertilizer companies, equipment manufactures, banks, and commodities traders, can leverage each other’s respective strengths and networks, lowering the risk of working with smallholder farmers. For example in Nigeria, AfGri, a major South African agricultural services company, is working with smallholder farmers to ensure that the Dangote conglomerate has a steady of supply of tomatoes for a new tomato paste factory.
  • Partnerships with the public sector to improve the business environment. By partnering with governments and donors to improve local infrastructure and lower trade barriers, businesses can ensure that the crops their farmer customers produce reach market before spoiling and, on the other hand, that their own products can reach farmers on time and at a competitive price. In West Africa, the USAID-supported Borderless Alliance is working with major transport companies in the region to track bribes, checkpoint delays, and other barriers to getting goods to market quickly and efficiently.
  • Reducing risk and cost by working with smallholder associations and pre-negotiating contracts. By pre-negotiating purchase agreements with major, global food companies and providing support for the aggregation of crops from many small farms, businesses can be certain that farmers will have a ready market come harvest time. In Malawi, Mozambique, and Zambia, Cheetah Limited, a Dutch agro-trader and processor, has contracted 20,000 smallholder farmers to produce high-quality paprika.

These approaches provide promising examples of the type of innovative structures that can help to change the face of smallholder agriculture in Africa, turning it into an engine to feed the region and the world and working with farmers as customers and business partners, not aid recipients.

Partnering for Agribusiness in Timor-Leste

SSG Advisors is pleased to announce that we are a member of the newly-awarded USAID/Timor-Leste Avansa Agrikultura project. This new, 5-year project is focused on improving the country’s horticulture value chains and will assist Government of Timor-Leste efforts to join ASEAN through technical assistance on certain ASEAN ‘single window’ requirements. Cardno Emerging Markets is the prime implementer of the project.

According to SSG’s Brett Johnson, “We are excited to be working with our colleagues at Cardno on the new Avansa Agrikultura project. Timor-Leste has tremendous agricultural potential and innovative public-private partnerships will be a critical tool in unlocking investment and growth in the country’s horticultural value chains.   We look forward to working with the entire team to make this project a success for USAID and the people of Timor-Leste.”