Kilimo Salama: PPP model of insurance in Africa


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Presentation by R Nganga, Syngenta Foundation for Sustainable Agriculture, at the CCAFS Workshop on Institutions and Policies to Scale out Climate Smart Agriculture held between 2-5 December 2013, in Colombo, Sri Lanka.

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Kilimo Salama: PPP model of insurance in Africa

  2. 2. Kilimo Salama links farmers to insurance, empowering them to invest in their farms. Kilimo Salama is a social enterprise incubated by the Syngenta Foundation for Sustainable Agriculture, Kenyan Insurer UAP and co funded by the IFC managed Global Index Insurance Facility . Our team has developed a range of products, already insuring over 100,000 farmers in 2013 in Kenya and Rwanda. Contents 1.The Challenge 2.Our Solution 3.Partnerships 4.Product Portfolio 5.Sales and Distribution Channels 6.Growth and Sustainability in Outreach 2
  3. 3. 1. The Challenge A bad season affects a farmer’s livelihood. During one bad drought season, a smallholder farmer can loose their entire harvest and lack the money to buy quality farm inputs the next season. A hard working, food sufficient farmer can become reliant on handouts simply because it didn’t rain at the right time. Traditional agricultural insurance has not been able to protect small holder farmers as it relies on farm visits to assess losses. Large scale farm: $1000 Premium - $50 Visit Costs + $950, insure Small scale farm: $10 Premium vs. - $50 Visit Costs - $40, can’t insure Kilimo Salama approaches insurance from a farmer perspective This is why we use index insurance: insurance that helps farmers cope with climate risks and does not require farm visits. 3
  4. 4. 2. Our Solution a. We approximate farmers’ production risk using a range of data sources b. We package insurance with credit, improved farm inputs, agronomic training, marketing contracts through support of partners c. We make it understandable by simplifying a complex product and the process of acquiring insurance for farm investment. Crops covered: Maize, Beans, Wheat, Sorghum, Coffee, Potatoes, 4
  5. 5. 4. Product Portfolio Rainfall Data + Agronomic Model 1. Weather Index - Rainfall Index and Satellite Index 2. Area yield Index 5
  6. 6. 5. Sales and Distribution 1. Retail Channel – Individual farmer purchases the insurance from Agro-vets, sales agents, Use of Mobile phones to register, Use of mobile money transfer to receive compensation. 2. Group Channel – Use of bundling approach. Credit linked product through MFI’s, Banks, Agribusinesses Eg OAF, Seed growers, coffee cooperatives, Replanting guarantee 6
  7. 7. 6. Growth & Sustainability in Outreach 2013 Half year shows 100,227 farmers insured and 53% of Target Premiums realised 2012 Expanding to Rwanda with 20,000 farmers after 2 seasons 2011 our first 20 contracted farmers through an Agribusiness 2010 our first 8,000 farmers Agcredit insurance March 2009 Syngenta Foundation launches the first pilot and the project collects first 18 ksh of premium 7
  8. 8. 3. Partnerships Our growth has relied on partnerships with organisations that can offer both small scale and large scale farmers a package + insurance: + These partners fall in the following categories: 1.Agribusinesses e.g Kenya Seed Company, Syngenta, Tropical Farm Management, SeedCo, MEA 2.Banks and Ag MFI e.g One Acre Fund, Equity Bank, and local Sacco’s 3.Mobile Network Operators e.g Safaricom, MTN 4.Government Departments: Ministry of Agriculture, Meteorology department, 5.Universities, Research institutions: KARI, CRF, ILRI, Columbia university, U.S.A 6.Insurance and Re-insurance companies: UAP, SORAS, Swiss-Re, Africa-Re, Kenya-Re 8
  9. 9. 7. Key Lessons Access barriers Legal and Regulatory framework in different regions. The need for non traditional approach required Reliable historical weather data not readily available in all areas Lack of strong regulated value chains and/or farmer organization in some expansion countries Negative perceptions to insurance from past experiences Restrictive in coverage of weather stations Critical success factors Client driven product development process Properly identified distributional channel that would ensure farmer access Experimentation in training models and marketing forums Innovation hub made of a team from diverse fields eg agriculture and insurance fields (Agronomists, Actuaries, Education and Extension, Satellite and automated weather stations technologies) Good partnerships with local governments and agric custodians/stakeholders Clip See KS farmer experience 9
  10. 10. Index Insurance works best as a package See KS farmer experience 10