Weather hazards, such as erratic rainfall and drought, cause significant hardship for farmers. Climate change is expected to further exacerbate farmers’ vulnerability to extreme weather changes. The anticipation of possible losses discourages farmers from making productivity-enhancing investments, trapping them in high-risk yet low-return agriculture activities.
Agricultural risks are projected to significantly increase in future due to climate change. Insurance is a sustainable approach to unlock investments in agriculture for farmers and improve their resilience and productivity. Crop insurance protects farmers against financial burdens posed by weather unpredictability and it is a way to ensure households invest in climate-smart high-productivity agricultural activities over seasons.
Risks faced by farmers
The number of insurance schemes targeting smallholder farmers is limited due to high monitoring and verification costs of traditional insurance; low demand for index-based insurance owing to low understanding of how the product works; and the fact that most insurance products, in their design, often fail to integrate complementary risk-management options, such as irrigation and drought-tolerant cultivars.
In an aim to empower small holder farmers by providing access to insurance, access to good agricultural practices coupled with advisory services, and access to farm inputs, ACRE Africa has developed innovations around digital inclusion that leverage on mobile phone technology, automated weather stations and satellite data to design suitable products best suited for smallholder farmers. This has brought together various stakeholders among them farm input companies, mobile technology firms, agronomists, researchers, off-takers and insurance companies to offer various services geared towards improving farmers livelihoods.
Currently, approximately 40% of Small holder farmers in Kenya are conversant with mobile phone technologies and the simple functionalities that help them go through their day-to-day operations. This has contributed a lot to the distribution of the commoditized micro-insurance to smallholder farmers through scratch cards in denominations ranging from KES 50 – KES 1000 which is affordable to the farmers.
Farmers access the insurance through village change agents (champions) who train them on risk management solutions among them, risk transfer through insurance. The farmers purchase the insurance by simply dialing a USSD code and remitting premiums through mobile money payment platforms (MPESA). This product distribution and deployment process has greatly succeeded due to the high penetration of access to mobile technology in rural areas.
Through the climate smart innovation of the Picture-Based project, village champions on the other hand are capacitated with smart phones to collect farmer profiles using the ‘see it grow’ app. The village-based champions take pictures of the crop and capture its development throughout all the cycles, they then submit these pictures remotely to agronomists for monitoring. The picture-based project aims to promote the adoption of productivity-enhancing yet resilient technologies through bundling with stress-tolerant seeds and personalized remote advisories to the profiled farmers. This will see the cost of crop insurance monitoring go down in the long run as well as the reduction of basis risk occurrences which is anticipated to improve demand and understanding of insurance products.
Insurance companies have in the past faced challenges in serving smallholder farmers due to the intensive extension services required to conduct crop monitoring and valuations and also the lack of data. With the picture-based innovation, the on-ground pictures taken by farmers will help reduce monitoring costs, minimize basis risks, create synergies with climate-smart technologies and builds trust amongst farmers since they are highly involved through the process. By taking pictures of insured crops, farmers engage directly in the insurance process, improving trust and tangibility. However, access to smart phones by smallholder farmers is still very low.
ACRE Africa works with different funders and partners to reach smallholder farmers among them; Innovate UK, World Bank, Alliance for a Green Revolution in Africa (AGRA), International Development Research Centre (IDRC) and Australian Centre for International Agriculture Research (ACIAR).