Disruptive Innovations Boost Uptake of Agriculture Insurance Solutions in Kenya
The World Bank, with support from the Korea World Bank Partnership Facility (KWPF) and the Korean Green Growth Trust Fund (KGGTF), and in partnership with Plug and Play Tech Center, is launching the Africa-Korea AgTech Innovation Challenge to identify disruptive agricultural technologies (DATs) interested to work in Kenya and Uganda. The World Bank seeks to create bridges between innovators and explore the potential to incorporate DATs into its work.
21 finalists were selected from the online application process, which closed on 30th November 2022.
The penetration of risk management solutions in agriculture in Africa remains low despite the sector’s highly vulnerability to the impacts of climate change and market inefficiencies. But thanks to technological advancement, the advent of new challenges including, climate change, and the willingness of organizations to move the needle from the current one percent penetration, things are steadily changing.
One such innovation designed to increase smallholder farmers’ resilience to climate change is the weather index-based insurance, a promising approach leveraging technology to support farmers manage climate risks.
In Kenya, one organization that has dared to enter into these uncharted territories, is Acre Africa which provides tailored crop insurance products to farmers to mitigate crop failure resulting from adverse weather patterns. This is done through a micro insurance product that is packaged as a scratch card of different denominations from KES 50 to KES 1000 that covers against excessive or insufficient rainfall or drought, helping build their resilience.
“Through “BIMA PIMA” which loosely translates to insurance in affordable portions, we wanted to have something tangible that would signify an exchange of money,” said Ms. Muthithi Kinyanjui, Head of Partnerships and Market Systems, Acre Africa.
The pricing model ensures that most farmers - 89% of whom had never accessed insurance services before - can afford insurance. A premium of KES 50, for instance, has a potential payout of 10 percent which is equivalent to KES 500 and would be enough to buy, say, a bag of seedlings.
A beneficiary of the World Bank’s One Million Farmers Platform (OMFP), Acre Africa successfully implements the Disruptive Agricultural Technology innovation across 15 counties in Kenya, up from 3 counties and are serving over 70,000 farmers, up from 10,000 farmers.
Acre Africa uses satellites to measure and quantify weather patterns and can predict any compensation requests. Payouts are triggered when the USSD code on the card is triggered and transmits data in the backend. To enhance transparency, trust and to speed up payments to farmers, BIMA PIMA has personalized features and functionalities that help address concerns and mystery of insurance,
“A few days before harvesting, I received an MPESA message from ACRE Africa which was a pleasant surprise. I had forgotten that I had purchased a KES 50 insurance card during a session where they explained that I would be compensated in case of insufficient rainfall,” said Mary Mate, a farmer from Embu County. “Now that I see it works, I will continue to purchase this cover.”
Farmers’ livelihoods are dependent on yields, therefore reducing losses benefits them. “I can now comfortably feed my family, harvest up to 15 bags of maize up from three bags and this has made life less stressful,” says another Acre Africa farmer.
Use of blockchain technology reduces costs, improves attractiveness, profitability and reach by smallholder farmers. As a result, more farmers across the country are now warming up to the idea of taking up insurance. In the last four seasons between 2020 and 2021, KES 5 million worth of premiums were paid by farmers.
Besides, the setup of a revolving risk pool fund amounting to $15,000 financed by Mercy Corps has reduced compensation payout time from three weeks to instant payments. Also, there have been accrued benefits such as lowered transaction costs and risks to the insurance intermediary. Acre Africa, for example, leverages access to farmer producer organizations secured through World Bank funded programs: the National Agricultural & Rural Inclusive Growth Project and Kenya Climate Smart Agriculture Project where they plug in their agents to pitch their insurance cards.
Other outcomes include:“The success of BIMA PIMA is a forward-thinking approach that builds the case for the development and uptake of more risk management solutions.” said Vinay Vutukuru, World Bank Senior Agriculture Economist. “If scaled up and emulated by many, the model can potentially propel crop insurance to greater heights and support the sector’s transformation and resilience.”
