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.