Mobile Insurance cover continues to grow in popularity.

Mobile Insurance cover continues to grow in popularity.

A 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

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Background

The Agriculture industry, including fishing and forestry, is responsible for over 24% of Kenya’s total GDP, as a result Kenya’s economy is hugely affected by the success or failure of their livestock and crops. In fact, between the years of 2008 and 2011 Kenya lost approximately $12 billion from its economy due to failing crops and livestock, largely as a result of droughts. The years 2015/16 are also proving to be hugely challenging, partly as a result of the strongest El Niño on record and record breaking high temperatures.

Approximately 75% of Kenya’s population are dependent on their livestock and crops for not only their livelihoods but also their survival.

Mobile drought insurance

Many of the small scale farmers in Kenya have as little as one acre of land on which they are hugely dependent, it is therefore essential that these farmers are able to insure themselves against the effects of extreme weather.

The first foray into mobile drought insurance was in 2009 and since then it has become more and more popular amongst the countries small scale farmers.

Kenya was the test bed for this type of insurance and is consider to be a market leader in this field. Prior to this development only 6% of the population in both African and the Middle East had any sort of agricultural insurance.

This ingenious insurance model uses mobile phones, removing the requirement for claim forms and making the system simpler, cheaper and less prone to problems that may arise from farmers making inaccurate claims.
The system is designed to ensure that small scale farmers are sufficiently protected during the bad years, allowing them to safeguard themselves and therefore continue farming and investing in their land whilst they wait for more profitable years.

The vast majority of claims are as a result of droughts however compensation has also been paid to farmers for the loss of their crops as a result of insect infestation and disease.

How does it work?

The scheme basically works by farmers registering for insurance and then paying a 5% surcharge on all their seeds and fertilizers. The company then communicates directly with the farmer by text messages, and claims are processed automatically when they are trigger by information from the local weather stations. Payments are then made to the farmers in the form of mobile money via M-Pesa.

M-Pesa is a mobile based mobile banking service that was launched in 2007 and is now used by over 20 million users, almost 50% of Kenya’s population. This type of payment is essential in Africa as the majority of the population still don’t have access to any formal banking

The popularity of mobile banking and mobile insurance is able to continue growing partly due to the creation of solar powered charging kiosks. This is a concept spreading quickly across parts of Africa where the supply of electricity is either nonexistent or unreliable.

Next steps

The success of this mobile insurance scheme in Kenya is driving further developments in the industry. In March 2016 World bank and the Kenyan government launched the more advanced “Kenya National Agricultural Insurance program”. This is a system that in addition to the information received from weather stations, also uses sampling and crop yield data, as well as GPS tracking.

Another recent development is that additional help will now also be given to the poorest farmers, with the government and private companies working together to pay for their premiums.

The World Bank Country Director for Kenya, Diarietou Gaye said: “The large majority of the poor in Kenya are farmers, so this programme has the potential to have a significant impact on Kenya’s economic development.

“This programme aims at improving farmers’ financial resilience to these shocks and will enable them to adopt improved production processes to help break the poverty cycle of low investment and low returns.”

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