|Credit: Al Jazeera|
Access to insurance is important to agriculture, not only does it protect farmers livelihoods in case of catastrophic losses of their crops as a result of unexpected seasonal changes, but also assures that farmers can quickly recover and replant in order to protect regions from suffering food shortages or long term rise in prices. Unfortunately access to agricultural insurance and disaster insurance is limited in many developing countries or if available, prohibitively expensive.
With that in mind, the World Bank- together with funding from the EU and the Netherlands- have developed the Global Index Insurance Facility (GIIF) for Africa. The GIIF seeks to create insurance products for small farmers based on specific defined weather events (known as index insurance) such as inadequate rainfall.
The advantage of index insurance is that insurance brokers do not need to visit the farm as specific climatological triggers make the policy effective. This results in low transaction costs and the fast disbursement of payments which are crucial to allow farmers to recover quickly and replant. The low transaction costs in turn allow for lower premiums which are necessary to attract small farmers. A key feature of GIIF supports local broker agents by funding implementing partners comprised of an intermediary “broker/agent” that develops index insurance products with local and regional insurance companies who then sell the products. The index insurance products are often bundled with loans or credit and distributed mostly through portfolio-level aggregators such as agribusinesses, banks and microfinance institutions, and cooperatives. The large Dutch agribusiness company Syngenta is an important partner to the GIIF and together launched Kilimo Salama, a social enterprise, to market weather, area yield, and livestock index insurance products covering a wide range of crops and dairy cattle. Kilimo Salama is now insuring 185,000 farmers in Kenya, Rwanda, and Tanzania, with plans to expand into East Africa
As index insurance is dependent on climatological triggers, its success is highly dependent on the availability of publicly available weather data with a high degree of local accuracy. To gain access to climate information it works with partners to provide the necessary data. The project team has so far focused on refining satellite data as a basis for the index working with the Dutch EARS program and recently IRI at Columbia University. Most of the GIIF implementing partners are using a mix of weather stations and satellites. Ground weather station data can be used for product design or verification of micro climates. Several companies have now been engaged to work on new methods/tools for making better use of satellite data with cooperation from NOAA. Syngenta, a major partner of GIIF, reportedly started out more than 5 years ago installing local weather stations but found they did not provide the reliability and accuracy required.
The GIIF and the CIRDA program are both working in Tanzania, Burkina Faso, and Benin, with GIIF planning to expand to for Ethiopia. The CIRDA Team has reached out to the GIIF to envision cooperation possibilities between both initiatives.
Initiatives like the GIIF demonstrate how important climate information is to development, poverty prevention and food security. It also demonstrates the needs of the financial sector in accessing reliable climate information. By understanding the key needs of climate information to end users it becomes easier to envision ways of reaching them and creating innovative partnerships.