Microinsurance pays USD 160,000 after drought and storms strike Kenyan farmers

The farmers receiving payout are members of Kilimo Salama, a seed growing programme run by Kenya Seed Company, the leading producer of maize seed in East Africa.

At the start of the season, seed growers receive maize seed on loan from Kenya Seed, as well as agricultural credits for fertilizer, chemicals, and farm operations from the National Bank of Kenya. The seed farmers need agricultural credit to cover the cost of planting the maize which amounts to USD 461 per acre. The value of both the seed and the loans is insured by an agricultural insurance initiative.

Historically, in years following drought, farmers are left without a harvest or the income to pay back their loans for seed and fertilizer. It often takes years for them to fully recover from a lost season. In addition, banks are reluctant to lend to farmers without the assurance of continuous income. Since the seeds are mainly grown without irrigation, drought is a major risk to the farmers in the business.

Seeds of success

To mitigate this risk, Kenya Seed, the Syngenta Foundation, UAP insurance, Swiss Re Corporate Solutions and the Global Index Insurance Facility (GIIF), a World Bank Group initiative, partnered to offer drought insurance to Kenya seed growers. Called Kilimo Salama or 'Safe Agriculture', the programme protects farmers' investment in seeds and fertilizer. This payout highlights the way insurance helps keep farmers in business.

Program sponsors

Says James Wambugu, Managing Director of UAP Insurance: “For three seasons now, our partnership has been successfully insuring 200 medium to large Kenya seed maize growers against drought. Today, UAP insurance is distributing payouts following a significant drop in precipitation during the long rainy season. The insurance programme is that part of the partnership that ensures its continued success over the long term.”

The success of the programme is based in a collaborative effort of many partners. GIIF as a multi-donor trust fund provided capital for Kilimo Salama. Funded by the European Union, Japan and the Netherlands, it supports the development and growth of local markets for weather and catastrophic index-based insurance in developing countries. The focus regions are primarily Sub-Saharan Africa, Latin America and the Caribbean and Asia Pacific. Swiss Re Corporate Solutions supports both Kilimo Salama as the international risk taker and the GIIF programme as the technical partner.

"The insurance is an excellent catalyst for agricultural partnerships between lending institutions, seed companies, and seed growers. It can be described as the missing link that will connect Kenyan farmers to credit and markets for their produce,” says Christina Ulardic, Swiss Re Corporate Solutions Head of Market Development Africa.

Happy farmers

In 2013, the Kilimo Salama initiative insured a total of 185,000 farmers in Kenya and Rwanda. It is planned to insure close to one million farmers in the East African region by 2015. The objective is also to expand the use of index insurance as a risk management tool in agriculture, food security and disaster risk reduction worldwide. The benefits of the programme can be seen in Kitale, Kenya. For farmers such as Mary Wanjiku Ihugo the payout is great news. “I have been multiplying seeds for Kenya Seed for many years and I am proud to contribute to supplying Kenya’s farmers with quality maize seed. However, this season I lost much of my crop to drought. The payout has been extremely helpful,” she says.

Published 5 December 2013

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