Monday, November 17, 2014

The Importance of Weather and Climate Data: A Perspective from an Agricultural Insurance Provider

ACRE is a registered insurance surveyor with operations in Kenya, Rwanda and Tanzania. Through their insurance products they have facilitated farmers' access to financial products in turn enhancing investment and agricultural productivity. The CIRDA Team has asked Ms. Warimu Muthike, Head of Business Development of ACRE, to provide an industry perspective on climate and weather information needs. 

Agriculture is Africa's economic cornerstone contributing 32% of Africa's total GDP. Despite an increase in urbanization, nearly three quarters of the Sub Saharan African population live in rural areas many of which are rainfall dependent smallholder farmers whose livelihoods depend on agriculture.

While investment in agriculture throughout Sub-Saharan Africa has led to increases in cash crop and subsistence crop productivity, weather risks threaten these gains. As we have increasingly seen, success in agricultural production that can lead to financial stability does not only depend on a farmer's agricultural knowledge. Often time it depends on having the tools to mitigate climate and environmental risks.

African smallholder farmers hoping to increase agricultural productivity are faced with this vicious cycle: 

  1. Farmers require capital to invest in production (seeds, fertilizer, equipment) and in risk mitigation tools to increase their chances of a good harvest and more income.
  2. Financial institutions deny loans to farmers as they consider smallholders a risky investments. The perceived risk is not only a result of the seasonal nature of production but also from the increased unpredictability of climatic conditions.
  3. Farmers have little capital to invest and thus compromise on the quality and quantity of investment leading to lower agricultural productivity. 
In order to break this cycle, risk transfer tools such as agricultural insurance are vital. The effectiveness and suitability of the insurance products developed by companies like ACRE relies heavily on both crop agronomic data and weather information. Without accurate, consistent and accessible weather data the development of relevant weather risk transfer tools is just not possible.

As an end user, ACRE has observed several improvements in access to data that have facilitated the development of the agricultural insurance sector. These include:
  • a greater number of private and non-profit organizations investing in research and dissemination;
  • greater ease in accessing data from various data sources;  
  • a gradual acceptance of the importance and role played by third party data collectors and; 
  • an increased recognition of the existence of a business case in the provision of accurate and consistent data. 

However, companies like ACRE continue to face important challenges in accessing reliable weather data and thus limit the amount of coverage that can be given to farmers. These challenges include:
  • Lack of consistency in the available data sets of weather and climate information. Agricultural insurance requires several years of consistent data to appropriately assess risk. 
  • Limits in the available data parameters. For example long term temperature data is difficult to acquire and yet it is key to develop products that cover losses due to pests and diseases in crops.
  • Data sometimes does not provide a true reflection of on ground experiences and topographic variations, thus there is a real need to have access to data that can be used jointly to reflect on ground experience. For example to analyse drought stress on crops analyst require a combination of data measuring precipitation and greenness of a region.
  • The emerging business application of weather and climate data appears to be proceeding at a much faster rate than legislature by national meteorological agencies who are the primary custodians of this data.

ACRE's ability to develop and scale agricultural insurance products depends on the increased research and development happening across Africa for the provision of quality weather and climate date. ACRE recognizes that there is a need for cross sectorial partnership to sufficiently utilise the data and technologies that have already been developed. Our team looks forward to collaborating with governments, private sector and other partners to bring the vision of  more professional, productive and food secure smallholders a reality.

Warimu Muthike

The CIRDA Programme is the UNDP Multi-Country Support Programme to Strengthen Climate Information Systems in Africa. Click here to learn more about it.
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