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Can Index Insurance Make African Farmers Climate-resilient?

Panel discussion on innovating agriculture for climate and food security in Africa, during the Global Green Growth Week conference in Addis Ababa, Ethiopia. Credit: Wambi Michael/IPS

ADDIS ABABA, Oct 20 2017 (IPS) – Index insurance is being promoted as a solution to protect climate affected smallholder farmers in Africa. This type of micro insurance is slowly gaining ground as a way of compensating farmers for lost crops and livestock due to climate change.

A number of African governments have either introduced or are piloting index insurance while some are still waiting and watching to see if it will have any tangible impact. Various experts attending the Global Green Growth Week conference in Addis Ababa, Ethiopia discussed and shared experiences with index insurance as an innovation in agriculture for climate and food security in Africa.

“We have managed to serve over 1.3 million farmers. So we have proved that index insurance is scalable. But the key challenge is financial education for the farmers and the regulatory environment regarding use of technologies like mobile phones to provide the services.”

Dr. Bruce Campbell, Director of the CGIAR Research Program On Climate Change, Agriculture and Food Security explained how in the older days of insurance you had to go out and find out

if anything is damaged and there would be a payout after everything is damaged “Index insurance is a really neat product because it is based on index. So if the rain drops below a certain amount, the insurance company knows the crop has failed and they will pay the money immediately.”

Campbell said with index insurance, the farmer gets the money immediately and does not have to sell his/her assets in order to survive. It also reduces the transaction costs.

According to Campbell, index insurance, also known as parametric insurance, has been around for close to 17 years and is slowly taking root in Kenya, Zimbabwe and other African countries. With this experience, countries can now share experience about it works and what needs to be improved.

A common example, Campbell told IPS, is of a remote rural farmer who buys seed, uses his mobile phone to take an image of the barcode on the seed pack and sends it to the insurance company to buy insurance. “When the rain fails, they can get the payment back as insurance,” Campbell explained.

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