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.

Innovative Water Partnership Enhances Climate Resiliency of Communities in East Africa

Photo Courtesy of the World Bank

Photo Courtesy of the World Bank

Every day, roughly 45 million m3 of water goes missing from global water systems. This is enough to serve nearly 200 million people. These losses cost water utilities approximately USD $14 billion each year, equal to a quarter of the total yearly investment in potable water infrastructure for the entire developing world. Water systems in Africa are particularly hampered by this problem. On average, more than 35% of the water supplied in East Africa is lost in this way. As climate change advances, these losses represent not only a significant financial burden, they place communities at risk of water shortages.

Relatively low-cost interventions to reduce water system loss can deliver impressive results in reducing costs and expanding access to existing water supplies. Using SSG’s STEP partnership methodology, the USAID/East Africa PREPARED project identified opportunities to create shared value through an innovative water loss partnership in Uganda with Itron, a major international water technology company, the Uganda National Water and Sewerage Corporation (NWSC) utility, and MTN, Uganda’s leading mobile operator. The partnership is designed to improve service delivery and customer engagement while also reducing Non-Revenue Water (NRW)—that is, the water that is processed and supplied by a water utility provider, but is then lost due to leaks, theft, or metering errors. Itron will support NWCS by providing management and technical tools to help the utility access real-time information about water leaks, illegal water consumption, and metering errors; streamline its management systems; and upgrade its infrastructure. MTN, meanwhile, will support a Water Community Communication (WACOCO) platform for two-way communication between the water utility and its customers, allowing water users to share their feedback, report leaks or water theft, and register complaints on service delivery with the utility. The Mobile operator will also integrate water billing to mobile money payment, thus reduce on bill paper use on bill printing and postage. The partnership seeks to reduce NRW in Jinja by 5% by August 2015, resulting in substantial financial savings for NWSC and conserving a scarce resource.

To forge this partnership, the USAID/PREPARED project convened a major workshop in Jinja, Uganda, in late September 2014 bringing together partnership stakeholders to discuss quality service improvement goals for the partnership. The group identified 14 customer types, agreed on service improvement standards and targets, and developed employee quality service improvement questionnaires and customer feedback instruments for eliciting customer feedback on water services delivery.  As a result, the partnership will not only reduce water loss, it will improve customer service in National Water and Sewerage Corporation in Jinja and Iganga utility– a win for the utility, customers and the environment.

According to SSG’s Polycarp Ngoje, “This partnership is just the beginning. In the months ahead, we will work with the partners to take the Jinja model to other municipalities in East Africa. We will also engage banks and financial institutions as partners to develop innovative financing instruments that will allow any municipality in East Africa to tap into credit markets to finance NRW reduction thereby driving scaling and sustainability.”