Crop Insurance

By Esther Kimani

Agriculture is the main source of income for rural communities in Africa. While investment in agriculture throughout Sub-Saharan Africa has led to increases in cash and subsistence crop productivity, weather risks threaten these gains. Smallholder farmers are often ravaged by uncertain weather that affects their harvests, restricted access to capital and farm inputs such as fertilizer or seeds, unfavorable trade policies and price fluctuations. Because many have no collateral cover, creditors consider it too risky to lend to them because unpredictable events may result in widespread loan defaults. These setbacks put the smallholder farmers in a vicious cycle of poverty.

Success in agricultural production and subsequent financial stability does not only solely depend on the farmers’ agricultural knowledge, but also on the containment of risks that affect production. Without risk management tools, formal financing and investment by farmers, gains in the agricultural sector will remain limited. Agricultural insurance is one of the ways to address these constraints by reducing uncertainties. Coverage motivates farmers to invest in riskier but potentially higher yielding farm activities. Timely insurance pay-outs after crop losses can help smallholder’s smooth consumption and prevent the sale of their assets. Insurance can also act as a catalyst, as lenders will be more likely to extend credit to farmers covered by insurance, allowing them to make productivity-enhancing investments. ACRE Africa, the brand name of Agriculture and Climate Risk Enterprise Ltd (ACRE) links farmers to insurance products so that they can confidently invest in their farms. All ACRE Africa’s products are custom tailored to meet the needs of smallholder farmers who previously have not had access to insurance.

ACRE Africa’s Crop Insurance Products
Our products enable smallholder farmers to access affordable insurance products that mitigate their risks and furthermore unlock access to agricultural credit.

a) Weather Index
Weather index-based insurance offers a method to insure farms as small as one acre by replacing costly farm visits with measurements from weather stations as the indicator of drought conditions. The weather stations measure the rainfall and these measurements are compared to an agronomic model specifying crops rainfall needs.

b) Multi-Peril Crop Insurance Cover (MPCI)
An MPCI cover covers loss of crop yields from all types of natural causes including drought, excessive moisture, pests and disease. Crop insurance is available for most crops such as wheat, maize, tea, and coffee.