Mobile drought insurance to protect Africa’s farmers

insuranceA mobile insurance scheme to help small-scale farmers in Kenya ensure their agricultural produce against drought and other natural disasters is spreading to other parts of Africa, as Neil Ford explains.

A greater proportion of sub-Saharan Africans work in agriculture than anywhere else on the planet but only six per cent of the population of Africa and the Middle East have any form of agricultural insurance.

“The insurance man” was a feature of many Western countries in past decades. Local agents collected tiny sums on a weekly basis to provide cover against long-term illness, funeral costs and unemployment.

Kenya has now adopted this model for the 21st Century via mobile handsets.
Farmers with as little as one acre of land can insure themselves against extreme weather events.

They pay a five per cent surcharge on purchases of fertilisers and seeds, which is registered with an insurance company, which in turn communicates with farmers via text message.

The first product was introduced on a small scale in Kenya in 2009 but has become increasingly popular. There are now no claim forms, as claims are automatically triggered by data from local weather stations and distributed in the form of mobile money.

This makes the system cheaper to operate and removes the possibility that farmers will make incorrect claims.

Safaricom is the market leader in Kenya at present but UAP Insurance is this year launching in Democratic Republic of Congo, Rwanda, Tanzania and Uganda. Such insurance aims to help smallholders to even out the good and bad years.

It should also encourage farmers to invest more in their land, with some assurance that they will receive compensation if their crops fail because of poor weather.

There are others reasons for crop failure, including disease and insect infestation, but drought is the most common problem.
First, Kenya was the birthplace of the “pay as you go” telecoms model. By allowing users to pay for call time upfront, telecoms companies were able to get around difficulties in payment collection.

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