Most farmers in Africa depend on rain-fed agriculture and their production system is the most vulnerable to climate-related events.

These loss-generating perils are responsible for reducing food security on the continent. Therefore, it is imperative to find appropriate risk mitigation and transfer solutions to ensure uninterrupted production and processing systems.

  • Farmers purchase crop insurance to protect against the loss of their crops due to natural disasters or the loss of income due to declining prices of agricultural products.
  • The National Bank of Commerce (NBC) in Tanzania have a Agricultural insurance produced in collaboration with Jubilee Insurance Companyaimed at protecting the country’s farmers, fishers and herders from losses when they experience various disasters that may affect their production.

It is important to look at the entire food production and processing value chain, minimize or eliminate food leakage and add risk transfer solutions such as crop insurance to close the loop.

Role of crop insurance in smart farming

The insurance sector, over time, has selected products that contribute to the protection of different aspects of life, people and businesses. The agricultural sector has not been left out, with the provision of appropriate insurance products to minimize the impact of these loss-generating events on food security.

Insurance companies provide adequate financial compensation in a timely manner to enable the provision of needed food resources without waiting for government or donor assistance.

Insurance provides stability to farm incomes by compensating farmers for losses quickly and efficiently. It ensures that the farmer stays on the farm doing what he knows and loves best, farming, thus contributing to food security.

The majority of the agricultural community of Africa generally operates with low margins. Most do not have title to land or bankable assets that they can use as collateral to access much-needed input finance. By using the insurance policy as collateral, farmers can access the financing they need, procure the right inputs on time, and be more productive per unit area, thus contributing to their country’s food security, in addition to also create their own margins.

The National Bank of Commerce (NBC) in Tanzania have a Agricultural insurance produced in collaboration with Jubilee Insurance Companyaimed at protecting the country’s farmers, fishers and herders from losses when they experience various disasters that may affect their production, according to Tanzania Daily News.

“We are very close to the agricultural sector, and that is why we increasingly appreciate the contribution of farmers to the country’s economy. Based on the same observation, we considered it good to offer the agricultural insurance product for the farmers and that by proving the effectiveness of the product, it was only recently that we compensated the tobacco growers in the Tabora region whose crops were affected by the bad weather,” noted the director of NBC bank Small and medium enterprises (SME), product and agriculture department, Raymond Urassa.

Digital agriculture and crop insurance

The penetration of risk management solutions in agriculture by Africa remains low, despite the sector’s high vulnerability to the impacts of climate change and market inefficiencies.

In addition, the lack of advanced technologies needed for early warning and weather and climate observation systems also impacts how the African continent perceives risk and adapts to the impact of risk factors that threaten food security.

According to an article published by world Bank on June 15, 2022One such innovation designed to increase the resilience of smallholder farmers to climate change is weather index insurance, which leverages technology to help farmers manage climate risks.

Acre Africabeneficiary of the from the World Bank One Million Farmers Platform (OMFP), is a group Kenya who has ventured into these new technological territories. It offers farmers tailored crop insurance plans to help mitigate crop failures due to adverse weather conditions. This is accomplished through the use of a microinsurance product known as Bima Pima, which loosely translates to “Insurance in Affordable Elements”.

“At the start of the farming season, a farmer buys a Bima Pima scratch card with a bag of seed or fertilizer, activates the card through his phone, pays an initial premium of KES 50 (US$0.50), and can recharge by SMS to increase the level of insurance coverage. ACRE Africa then geolocates the farm using the mobile location service,” said Muthithi Kinyanjui, Partnerships and Market Systems Manager, Acre Africa.

A combination of satellite data and weather stations then determines whether the farmer will receive payment directly to their mobile account in the event of drought or excessive rain on their land. The blend of smart design and digital innovation provides farmers with the ease of purchasing scratch cards from local agricultural dealers, system usage, recharging capability, and options to pay the premium in small amounts and at the over time.

Simon Schwall founded Oko in 2020 to provide low-cost crop insurance to smallholder farmers, with a mission to help overcome inadequacies in income distribution for those who feed the world. The Israel-based startup has partnered with local phone carriers and mobile payment processors in mali and Uganda to set up the service.

According to an article published by Microsoft on June 14, 2022, Oko uses the concept of index insurance to reduce costs. Many insurance policies have predefined administrative costs to account for claims verification, appraisals, and other cost uncertainties. Index insurance uses data analysis and risk calculation rather than on-site inspections to develop a cheaper and more accessible policy for rural clients.

Farmers register with Oko using their mobile phones. Oko then uses historical data and weather data to analyze insurance risk and determine the cost of the policy. Suppose the real-time data shows a severe drought or flood. In this case, Oko pays farmers immediately, eliminating the need to file a claim and ensuring farmers recover from a bad season much faster than before.

Having the assurance that their work will not be completely lost in the event of bad weather is a huge relief for these farmers who have their eyes on the sky and their hands in the earth.


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