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Improving the livelihood of smallholder farmers
Agriculture Index Insurance: Kilimo Salama
Can cell phones beat drought? How can dairy farmers protect their best cow? What if growers need a a loan? The Foundation's insurance program helps smallholders deal with weather and other risks.
Around the world, millions of smallholders are facing the effects of climate change. Most of them farm fewer than five hectares, often in remote areas. Extreme or erratic rains, flood and drought threaten their livelihoods.
In Kenya, the agricultural sector employs three-quarters of the working population. In a bad season, smallholders can lose their entire harvest. They then lack the money to buy quality seeds and other inputs for the next growing season. Kilimo Salama is an agricultural insurance product that helps farmers cope with climate change and devastating weather shocks.
The Kilimo Salama Model
Kilimo Salama means "safe farming" in Swahili.
Insurance should be simple, affordable, and relevant to small farmers. Kilimo Salama insures farmers against drought and excess rain. Launched in Kenya in 2008, it is now the largest agricultural insurance program in Africa.
By the end of 2013, Kilimo Salama insured 187,000 farmers in three countries. Previously, few of them could afford such cover because of the high costs. Traditional crop insurance relies on expensive farm visits to verify claims. Kilimo Salama does not visit the farms. Most of the program is designed specifically for smallholders. It uses automated weather stations and mobile payments. These dramatically reduce administrative costs, finally enabling a premium price that millions of farmers can afford.
Kilimo Salama is funded through the Syngenta Foundation and the Global Index Insurance Facility (GIIF). Launched in 2009, the GIIFis a multi-donor trust fund financed by the European Union, Japan and the Netherlands, and implemented by IFC and the World Bank.
Our vision is for agricultural insurance to be as common on a farm as fertilizer should be.
Kilimo Salama’s use of technology is the key to the microinsurance product’s affordability and the model’s scalability. Almost all Kilimo Salama’s clients are smallholders scattered throughout rural areas.
Index insurance uses weather data from satellites and automated weather stations as a proxy to estimate farmers' harvest situation. At the end of each growing season, the collected weather data are automatically compared to an index of historical weather data. If the season's rainfall was, for example, 15% above or below the average, the insurance payout owed to client farmers is calculated and sent. There is no "claims" process.
An automated weather station installed in East Africa. The station collects and automatically transmits measurements to the Kilimo Salama cloud-based server every 15 minutes.
By reducing their risks, insurance encourages farmers to invest in their farms. This way, they can raise their yields. Findings from Kilimo Salama's impact survey in October 2012 suggest that insured smallholders step up their farm investment by about 20 percent.
Kilimo Salama now comes in various forms and covers a wide range of risks:
This is intended for smallholders with a loan and input package from a microfinance institution (MFI) worth $100 or more. Farmers produce corn on less than a hectare using improved inputs, and receive agronomic training from the MFI's field agents.
The MFI increases smallholders’ productivity and food security by linking them to credit, inputs, and extension services. Kilimo Salama insures the farmers' loans for buying certified seed and mineral fertilizer.
Contract Seed Grower Insurance
Kilimo Salama products can easily be adapted for large-scale producers. This one is for farmers contracted by a company producing certified seed on more than 20 acres and insuring an average of $650 per acre. These experienced larger-scale farmers receive advice from the seed company and invest heavily in fertilizers and crop protection.
The seed company and Kilimo Salama partner to provide insurance to certified corn seed growers. The seed company pays the premiums at the start of the season. It later deducts the cost from the payment made to farmers for their harvest delivery.
Dairy Livestock Insurance
This is intended for farmers with higher-yielding cows, delivering milk to dairy cooperatives or receiving a loan to purchase a cow from a lending institution.
The livestock cover is offered in partnership with a co-op or a lending institution. The former pays the premiums up front and deducts them from the payments to farmers for milk deliveries; the latter combines the cost of insurance premium with the loan. The cover is linked to an animal care package and vaccines.
Farmers purchasing certified seed or fertilizer can choose the replanting guarantee. A seed company includes the insurance premium into the price of seed. Each bag contains a scratch card with a code. To register for the insurance, farmers text the code to Kilimo Salama. The replanting guarantee begins at registration and ends after two weeks. If there is a drought in that period, the farmer receives an SMS voucher for a new bag of seed to replant within the same season.
In February 2014, the IFC signs two new grant agreements with our Foundation. Funds of $3.9m will help expand index-based insurance to a million farmers. Tanzanians will now also benefit. Kenyan media coverage includes a film. Among other outlets reporting is the Shanghai Daily.
Here is the January 2014 review of Kilimo Salama.
In November 2013, Kilimo Salama publishes testimonials from farmers with dairy insurance. See what they say.
Here is a film made in connection with the November 2013 Tech Awards, at which Kilimo Salama won the Flextronics Economic Development Award.
October 2013: Kilimo Salama wins an award from AON for innovation.
In February 2013, Kilimo Salama extends insurance in Kenya to dairy cows. Here are the media release and a local TV clip.