Low-cost insurance policies aim to prevent poverty among small-scale farmers in Kenya

Mar 19 2010

A pilot crop insurance project recently launched in Kenya, aims to compensate small-scale farmers when crops fail, in an effort to break the cycle of poverty, Business Daily reports. While crop insurance is widely used in the developed world, cost has been a major barrier to offering policies to small-scale farmers in the developing world. In addition, "micro-insurance, particularly for agriculture, has largely failed because it offered no immediate benefit to farmers," the newspaper reports (Mbogo, 3/18).

The Kenya program - called "Kilimo Salama," which means "safe farming" in Kiswahili - uses "low-cost, mobile phone payment and data system, and automated, solar powered weather stations, to offer" Kenyan farmers "'pay as you plant' insurance to protect their investments in desperately needed high-yielding seeds, fertilizers, as well as other farm inputs," according to a Syngenta Foundation for Sustainable Agriculture press release (.pdf). The program, a partnership between Syngenta, UAP Insurance and Safricom, is available in certain regions and there are plans to phase it in to "all key farming areas" of Kenya by 2012, according to the press release  (3/5).

The insurance is available for seeds, fertilizer and farm chemicals that are associated with the program, according to Business Daily. The premium is equal to five percent of the value of inputs, which is about 10 shillings or 13 U.S. cents for a one kilogram bag of "improved, high-yield maize seed," the newspaper reports (3/18).

"The same shops that provide agricultural supplies also sell the insurance," Reuters AlertNet reports. "They take pictures of the purchased products with a mobile phone and then, using the mobile phone network, send the info to a central computer together with the phone number and name of the buyer. Within seconds a text message is sent to the phone of the insured farmer with all the details of the policy." Payout decisions are currently made based on data collected from about 30 weather stations, while total of 500 stations are planned, the news service writes.

"Insurance for poor people and low-income farmers is a relatively new field for many insurance companies, but there is a growing realisation that there is money to earn from small fees paid by potentially millions of people," Reuters AlertNet reports.

"Kenya is a good country to introduce insurance like this because almost every Kenyan owns a mobile telephone," Syngenta Foundation economist Rose Goslinga said. The article notes that a variety of "low-cost insurance schemes" aimed at low-income consumers have popped up across Kenya. "Almost half of the Kenyans live below the nation's poverty line. Insurance in the past was considered something for the nation's rich, and far too expensive for its poor," Reuters AlertNet writes (Eveleens, 3/17).