\u201cI paid 20,000 CFA francs (\u20ac30.50) to ensure my [bean] harvest, and after the drought destroyed everything, the people at OKO paid me 30,000 CFA francs (\u20ac45.70). I was really surprised, it\u2019s a really good deal ! With this money, I was able to buy a 25-kilo bag of rice to feed my family. I\u2019ll definitely be taking out insurance again,\u201d says David Gasso Kobly, a small-scale cocoa farmer in C\u00f4te d\u2019Ivoire. This father of five, aged around fifty, is still amazed.<\/p>\n
In Bahompa, his village of nearly 10,000 inhabitants, 70 kilometres south-west of Yamoussoukro, several farmers like him have taken out the weather index insurance offered by OKO \u2013 an Israeli company that designs technology-based insurance products, known as \u2018insurtech\u2019 \u2013 and are delighted to be able to withstand the impacts of a catastrophic cocoa harvest.<\/p>\n
Based on data sensors and satellite images, \u2018index\u2019 insurance provides real-time information on rainfall levels associated with drought or flooding. In the event of adverse weather conditions, it provides for automated compensation proportional to the severity of the event, paid directly into the mobile accounts of insured farmers who have suffered damages.<\/p>\n
Less costly, more transparent and quicker to implement, but also more profitable for insurers, these index-based solutions against weather risks are mainly being developed in the countries of the Sahel and East Africa, breaking down barriers to market access. In Africa, the insurance penetration rate (total premiums as a proportion of GDP) remains low, at less than three per cent across all segments, according to Standard Bank.<\/p>\n
Technological and digital innovation
\nSince its launch in Mali in 2021 and in C\u00f4te d\u2019Ivoire the following year, OKO, in partnership with the insurer Allianz and the telephone operator Orange, has insured some 24,000 and compensated nearly 4,000 smallholder farmers growing maize, cotton, sorghum, groundnuts, sesame and cocoa. In Mali, the average annual premium paid by a farmer amounts to \u20ac13 per hectare for one season. In C\u00f4te d\u2019Ivoire, the annual premium is \u20ac24 for two seasons, on average. The smallholders who were paid compensation received around 25 per cent of the insured amounts, which helped them to prepare for the next season.<\/p>\n
In Kenya, ACRE Africa offers its index insurance via a scratch card sold with bags of seed or fertiliser. When farmers activate the card on their phone, they pay an initial premium of 50 Kenyan shillings (\u20ac0.35) for cover and can increase the level of cover by topping up by text message. At the same time, they send information to ACRE Africa, which geolocates the farm.<\/p>\n
A recent evaluation by the Luxembourgish NGO ADA (Appui au D\u00e9veloppement Autonome), which supports microfinance in developing countries, concludes that it enables farmers to secure their present and future income, to receive rapid compensation, to continue buying inputs, to prepare for the next season and even to obtain credit more easily from local banks.<\/p>\n
\u201cAccording to the first surveys carried out on the ground with producers\u2019 cooperatives, index insurance is very popular and the rates seem to be affordable,\u201d says Caroline Morilhat, programme manager at ADA. Agricultural insurance could ultimately help prevent a portion of the rural exodus expected as a result of climate change.<\/p>\n
\u201cOur aim is to test and experiment with new solutions,\u201d adds Morilhat. The organisation\u2019s focus is on nomadic livestock farmers in West Africa.<\/p>\n
For several months, ADA has been closely following the index-based insurance designed by the Luxembourg start-up Ibisa for Senegalese livestock farmers, in cooperation with the Billital Maroob\u00e9 Network (RBM), representing pastoralist livestock farmers\u2019 organisations in the Sahel, and Senegal\u2019s national agricultural insurance fund, the CNAAS.<\/p>\n
Increasingly vulnerable nomadic livestock farmers
\n\u201cUntil now, the best form of protection was to have the information required to be able to take the animals where they can pasture. Another was to keep animals of five or six years old that are more resistant to drought and can be sold during hard times. But, with one drought after another, it is becoming increasingly difficult to manage, making farmers more vulnerable than ever before. And when farmers lose half of their livestock to climate hazards, it can take them over fifteen years to recover their losses […]. Senegal has 350,000 pastoralist families. Bearing in mind that the average family is made up of eight people, that\u2019s a lot of people,\u201d says Aliou Samba Ba, president of the RBM in Senegal and a livestock farmer with around 50 head of cattle.<\/p>\n
After developing index products for almost 700 livestock farmers in Matam and Podor in northern Senegal, Ibisa is now targeting 4,000 Senegalese livestock farmers for the 2023-2024 season and \u201cis looking to fine-tune its data\u201d, says Manon Loison, Ibisa\u2019s Senegal and West Africa project manager.<\/p>\n
The start-up aims to offer its technical solutions to the whole of Senegal, and then to the whole of the Sahel, which has 173 million head of livestock. The product offered to nomadic livestock farmers is 50 per cent subsidised by the CNAAS, and costs FCFA 5,000 (\u20ac7.60).<\/p>\n
\u201cWe have several types of cover, July-August and September-October, with a rainfall index corresponding to these two periods, as well as three alert levels, ranging from moderate drought to critical drought. If the rainfall thresholds are not reached, a payout is triggered and isn\u2019t linked to the declaration of livestock losses […]. We work on the principle that whenever there\u2019s drought, there is less fodder available and the animals are therefore at risk,\u201d explains Jean-Baptiste Pleynet, a co-founder of Ibisa and an actuary (specialising in statistical calculations for insurance companies). The aim is to enable farmers to quickly buy feed for their animals.<\/p>\n
\u201cWe would have liked grazing-related risks to be covered. But measurable rainfall criteria, reflecting historical trends, were chosen […]. In the past, farmers didn\u2019t want to hear about cattle feed or vaccination. Then they realised that it protected their animals and it became normal practice. It\u2019s the same with index insurance. They need convincing, and they\u2019ll pay for cover if they see that it protects them,\u201d says Samba Ba.<\/p>\n
The technology and insurance company Pula, which launched its operations in Kenya in 2015, designs hybrid agricultural insurance products indexed on weather conditions and the presence of pasture for livestock. It also offers index insurance based on yields. Pula has now extended its coverage to Tanzania, Mozambique, Zambia, Uganda, Ethiopia and Nigeria.<\/p>\n
What business model should be put in place ?
\nThe models are being fine-tuned and index-based agricultural insurance is now widely encouraged by agribusiness multinationals, particularly in C\u00f4te d\u2019Ivoire, Ghana and East Africa.<\/p>\n
OKO, after forging partnerships with Touton and Olam over the last two years, is now in talks with agribusiness giants such as Cargill, Mars, Mondelez and Barry Callebaut to bring its solutions to small farmers in the cocoa and cotton sectors. The aim is to insure 30,000 farmers in C\u00f4te d\u2019Ivoire by the end of 2025. And the long-term potential is huge, with the prospect of insuring 600,000 growers in the cocoa sector in C\u00f4te d\u2019Ivoire and 130,000 in the cotton sector.<\/p>\n
\u201cThese agribusinesses already have a network of farmers and data that can be used to create customised insurance products. They have sustainability goals and programmes, and they\u2019re looking for climate resilience solutions, to help growers and to safeguard their value chains […]. At present, a bad season leaves the farmers with little or no income and struggling to prepare the following season for them,\u201d explains Simon Schwall, CEO of OKO.<\/p>\n
Although multinationals have a very positive view of these index-based insurance policies covering major industrial crops (coffee, cocoa, cotton, tobacco) and encourage farmers to buy them, they are still reluctant to play a bigger role by financing or partially subsidising the products on offer. They still tend to offer the farmers a \u2018harvest package\u2019 \u2013 a payment for the season\u2019s harvest minus inputs and the agricultural insurance premium.<\/p>\n
In most African countries, agricultural insurance is neither subsidised (with the exception of a few countries such as Senegal, Morocco and Rwanda) nor supported by powerful agribusiness companies and the farmers themselves pay the full premium. This limits the entry of these index-based insurance policies into small markets such as Niger and Burkina Faso, where there is a clear need.<\/p>\n","protected":false},"excerpt":{"rendered":"
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