Over 180,000 smallholder farmers in East Africa have insured their crops, in a new move that is fuelled by the continued unpredictable weather patterns that has resulted in losses worth millions of shillings thus increasing food insecurity cases.

The new move is championed by International Finance Corporation IFC through their signing of two grant agreements, with a combined value of over Sh330 million with the Syngenta Foundation for Sustainable Agriculture to expand index-based insurance to small-scale farmers in Kenya, Rwanda and Tanzania. The deal spells a new affordable approach to insurance in farming which is index based and moves from the expensive old norm in agriculture insurance which relies on on-farm monitoring of losses, evaluated through farm inspections.

According to Nila Uthayakumar the project implementer from Syngenta Foundation, traditional indemnity-based agricultural insurance has seen little success due to high transaction costs and premiums and as a result many smallholder farmers were locked out. “The transaction costs to insure one acre is similar to those of insuring a 1000 acre farm, the premiums from the one acre farm would never cover the related transaction costs,” explained Nila.

Nila explained that despite the vulnerability of the farmers to the climate change shocks like flooding and extreme drought there was no practical solution to cushion them hence their unabated suffering. “Much of the agricultural land in Kenya, Rwanda and Tanzania is rain fed and certain regions are vulnerable to drought and erratic rain. Many smallholder farmers limit their losses to extreme weather by making minimal investments into their land, leading to reduced yields and continued food insecurity,” noted Nila.

Its behind this background of untold tales of suffering from the small-holder farmers that Nila and her foundation have fronted the new model of weather index based insurance offers insurance to both smallholder and large-scale farmers. The model is deemed to replace the costly farm visits with measurements from weather stations to approximate actual farm losses. The weather stations measure the rainfall within a particular area and these measurements are compared to an agronomic model specifying particular crops’ rainfall needs. If the needs are not met, all the farmers insured under that station receive a payout.

The new model dubbed Kilimo Salama has been operational for since 2009 and has now covered about 187,000 farmers who are drawn from Kenya Rwanda and Tanzania. Farmers interested in the model can register and make payments through already the existing farmers’ friendly distribution channels like Micro Finance Institutions, farmer cooperatives Agricultural NGOs among others. These channels act as aggregators and link between the insurer and the farmers.

The policy is offered as a partnership between Kenyan insurer UAP and international reinsurer Swiss Re Corporate Solutions. Nila added that an aggregator of farmers like MFI is the policy holder. The aggregator handles the tasks of administering the insurance policies, collecting and transferring premium payments to the insurer and distributing payouts to individual farmers after seasons where local weather stations have registered that extreme or disease have damaged crops.

Farmers buy policies for monthly payments as low as Sh117 for the dairy farmer which covers their animals. The team has also developed training materials and conduct trainings to empower farmers with financial literacy and insurance importance before being enrolled. Currently the insurance covers farm inputs or harvest against drought and excess rain and yield shortfall. Weather risks are measured through weather stations and yield shortfalls are measured through a yield index. The crops covered in Kenya under the model include maize, sorghum, wheat, soya beans, potatoes and coffee. In Rwanda, it is currently offered on Maize and beans and more crops will be included soon according to Nila.

The product is currently widespread western Kenya and parts of Central region.  Reuben Biwott a smallholder farmer from Kitale who have adopted Kilimo Salama has never regretted the service 3 years after enrolling for it. “The insurance has given me confidence. It has transformed my attitude from subsistence farming to farming as a business. I am free from the fear of failure,” Biwott said.

Nila noted that the success of the model is hinged on the availability of reliable weather infrastructure like weather stations and satellites which are used in for monitoring rainfall and estimating farm losses. According to Nila implementing Kilimo Salama required an investment in fully automated weather stations and to date78 fully automated weather stations have been installed in Kenya and 38 in Rwanda. These stations transmit weather data every 15 minutes over the 3G mobile data mobile data network. The automated weather stations assure both the insurer and the reinsurer about the the data availability and accuracy.

Marco Ferroni, Executive Director of the Syngenta Foundation for Sustainable Agriculture who was present during the signing of the grant said "The support from IFC and the EU has been instrumental in the expansion of our index insurance program. This year our team aims to reach over 600,000 farmers and expand the program to cover Tanzania as well.