Innovative microinsurance programme launched to help Rwandan farmers protect their crops

Some 20,000 farmers in Rwanda stand to benefit from a microinsurance plan designed to aid in protecting their crop investments.

Kilimo Salama, "safe farming" in Kiswahili, is a project that offers low-cost microinsurance to maize and bean farmers in southern and western Rwanda, protecting them from financial loss if their crops are damaged by weather.

The project is a partnership between Swiss Re Corporate Solutions, the Syngenta Foundation for Sustainable Agriculture, the Rwandan Ministry of Agriculture and Animal Resources, the One Acre Fund and Rwandan insurer SORAS.

Kilimo Salama bundles insurance with loans provided by the One Acre Fund for fertilizer and other farm-related items. The insurance premium is paid as part of the loan repayment.

An index-based solution…

Eight weather stations, all equipped with transmission systems that broadcast weather updates and rainfall amounts, have been set up in the participating provinces. When a station detects weather conditions detrimental to crops, a payout to One Acre Fund is triggered. In turn, the Fund either compensates the farmers participating in Kilimo Salama or forgives their loans.

"The use of data from automated weather stations to approximate actual farm losses is an innovative and cost effective alternative in situations where the losses can't be addressed through traditional means of assessing claims for each smallholder," says Christina Ulardic, Head Market Development Africa for Swiss Re Corporate Solutions. Traditional means include agents conducting individual field assessments, which can be costly and drastically delay the crucial payout to the farmers.

…that's scalable…

The Kilimo Salama crop insurance programme was launched in 2009 in central Kenya with Swiss Re as a partner and main risk taker and 200 smallholder farmers participating. After the area was hit with the worst drought in decades, the farmers immediately received compensation. The project was expanded to five more regions the next year. As of 2012, around 50,000 Kenyan farmers are insured, and insurance payouts have been made to over 10,000 farmers.

"The programme has progressed in Kenya because the risk transfer is bundled with agricultural inputs and loans," adds Ulardic. "This clears the way for productivity and income gains for the farmers." The product therefore has the potential to make agricultural microinsurance affordable and attractive for smallholder farmers.

…and provides incentives

The key for success is that there is enough value added for the farmers - value that standalone insurance doesn't necessarily provide. This decides on whether there is sufficient demand for the product. Another plus to the project are the inherent alternative distribution channels provided by the local lenders and through the agricultural dealer networks.

Organisers believe the programme gives smallholder farmers an incentive to invest in higher-quality seeds and fertilizer for their crops, as poor weather conditions may cause a farmer to lose not only his livelihood, but the money invested in the crops as well.

"When it comes to the weather, most farmers have no choice but to simply pray for rain. And if the rains don't come, the crops don't grow," says Agnes Kalibata, Rwanda's Minister for Agriculture and Animal Resources in a press release on the Rwandan project launch on 11 October 2012.


Published 22 October 2012

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