A weather index based microinsurance scheme which has been active in Kenya for more than two years is now expanding its reach to include Rwanda as well. The scheme which offers farmers a way to protect their crops against weather extremes through the use of insurance products with parametric index type triggers is operated by Syngenta Foundation for Sustainable Agriculture, the Ministry of Agriculture and Animal Resources, One Acre Fund, SORAS Insurance in Rwanda, and Swiss Re Corporate Solutions.
By expanding into Rwanda, the partnership hopes to make Kilimo Salama available to 20,000 farmers in the southern and western provinces of Rwanda. The low-cost weather index insurance products are designed to protect farmers loans for purchases of seeds, fertilizers and other farm input products. The product is widely accessible to even the smallest farmers. Even farmers who plant crops on as little as a tenth of a hectare are able to benefit from the insurance protection against financial losses when the weather damages their crops.
“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. At a time of global change, we are trying to give farmers more options so they can meet these challenges and prosper,” said Agnes Kalibata, Rwanda’s Minister for Agriculture and Animal Resources.
Similarly to other microinsurance schemes, such as Fonkoze and MiCRO backed Kore W in Haiti, the weather index insurance premium is bundled with the loan repayments that farmers make from loans take out to buy farming products. It’s seen as a way to encourage farmers to invest in their businesses as they can be secure in the knowledge that the insurance will help them to recover should the weather impact their crops.
“Extreme or erratic rains and drought trap many Rwandan farmers in poverty. Repeated bad weather can rob them of the means to recover in the following growing seasons,” said Marco Ferroni, Executive Director of the Syngenta Foundation. “Following the launch of Kilimo Salama crop insurance in Kenya in 2010, we now are offering the products in Rwanda. We have in Kilimo Salama a proven micro-insurance strategy that will work. To date, we have insured 73,000 farmers in Kenya and Rwanda, and have made insurance payouts to over 10,000 farmers in Kenya.”
The expansion of this weather index insurance has only been made possible with the installation of eight new fully automated weather stations in Rwanda. The weather stations are the first of their kind in Rwanda, fitted with transmission systems capable of broadcasting regular updates on actual weather conditions and rainfall recorded. When data from a particular station indicates that weather conditions (including excessive rainfall and drought) are likely to cripple crops, it will trigger a payout to One Acre Fund, which will subsequently compensate individual farmers or forgive 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 cannot be assessed through traditional means of assessing claims for each smallholder” adds Christina Ulardic Head of Market Development Africa with the project’s international risk taker Swiss Re Corporate Solutions. “Moreover, a model where insurance is bundled with other farm services, such as credit and distributed through an intermediary who directly deals with the customers has proven to be more successful than standalone insurance offerings.”
“By using the weather stations to verify local weather conditions, we are avoiding expensive and lengthy claims procedures that have created mistrust and led people to avoid insurance,” said Benjamin Mbundi, Managing Director of SORAS Insurance. “This product has the potential to make agricultural micro-insurance affordable and attractive for smallholder farmers and economically viable for insurance companies in developing countries that had previously ignored most of the agricultural sector.”
Kilimo Salama is another example of a successful weather index insurance product in the developing world. The use of parametric triggers makes the policies much simpler to understand for the policyholders and the prompt, almost immediate, payouts enable farmers to recover from weather disasters with minimal impacts to their livelihood and family.
Kilimo Salama is also unique as it uses the M-PESA mobile payments system, enabling the policies to make claims payments to farmers via a mobile phone, such as in this case back in September 2010.
Swiss Re provide the reinsurance cover for the Kilimo Salama program and also assisted with the design of the insurance products.