Agricultural production and food security have made impressive progress in South and South-East Asia over recent decades. The improvements have played a key role in fueling economic growth. However, climate change and related erratic weather events threaten farmers’ livelihoods, as do pests and diseases. Poor harvests can prevent farmers from repaying their loans. They are then naturally unwilling to access credit or use modern inputs in the next season. Yields and income, therefore, typically fall again.
In OECD countries, most farmers benefit from crop insurance or the equivalent in price supports and guarantees. By contrast, farmers in middle- and low-income countries, do not have access to such risk mitigation services. Most of these farmers are smallholders.
Agricultural insurance is a valuable financial instrument for smallholder farmers. It increases their resilience by avoiding or limiting potentially devastating financial losses. This prevents them from falling into poverty. Insurance also eases access to finance and increases smallholders’ productivity. They can confidently invest in their farms and adopt new technologies that enable economic prosperity and eventual graduation from poverty.
The Syngenta Foundation and Agricultural Insurance
The Syngenta Foundation for Sustainable Agriculture (SFSA) has been working on agricultural insurance since 2009. We started by developing innovative and affordable insurance tailored to smallholders in East Africa. In 2014, we created an independent social enterprise called Africa Climate Risk Enterprise (ACRE Africa). So far, ACRE has operations in three countries, an innovative range of micro-insurance products and over 1.7 million farmers insured.
SFSA’s Agricultural Insurance Solutions (AIS) team is now using its experience to bring smart risk-mitigation strategies to farmers elsewhere. With tailored micro-insurance products, farmers can confidently invest in quality inputs, get access to credit and increase their productivity.
The AIS team operates as an intermediary, not an insurance company. We build a bridge between demand and supply in the agriculture insurance market and align the various organizations involved. Our stakeholders include farmers, cooperatives, the public sector, input suppliers, local insurers and international reinsurers, microfinance institutions, NGOs, and mobile network operators. We monitor and assess risk and develop insurance products specifically for smallholders. These products typically cover a variety of crops against weather risks like drought, storms, flooding, and erratic rains. Other examples include yield cover.
We offer a range of services such as technical product design, stakeholder coordination, and business development. That combination is usually unique in agricultural insurance value chains. SFSA’s AIS team helps build the capacity of local insurance companies to add agricultural insurance products to their portfolios. We partner with agricultural organizations to tailor and implement the best-suited products.
The Syngenta Foundation aims to deepen and strengthen the ‘safety-nets of smallholders in Africa and Asia through market-led upscaling of agricultural insurance solutions. The innovative products aim to reduce risks associated with climate, weather, pests, and diseases. As a result, smallholders become more productive and resilient to climate-change-related shocks. They also reduce their vulnerability to risks exacerbated by climate change. These improvements lead to enhanced food security, growing income, and inclusive rural growth.
AIS’s team takes a lead in market research in new areas to build data, product, distribution, and digital infrastructure. The aim is to enable the cost-effective development of microinsurance products and channels for low-cost delivery. As a market ‘think tank’, we aim to innovate, develop and build scalable agricultural insurance through local partnerships and modern digital technologies. We also integrate indigenous smallholder knowledge into product design and distribution.
Insurance improves loans access for smallholders
In order to achieve the desired impact, the Syngenta Foundation’s AIS team works with multiple stakeholders. Our market development goes through the following phases:
Innovation: Focuses on developing and validating new products that meet smallholder needs. The product range includes a variety of crops and perils designed for different geographies. These products are fine-tuned to specific client risk profiles, distribution channels, and local conditions. The products must be profitable for the insurer and affordable to the farmer. The main activities in this phase include product design, testing, modification, and technology development.
Develop: As a next step, the market for agricultural insurance must be developed. This phase focuses on building the capacity of local supply-side and demand-side partners across the public and private sectors. To increase farmers’ adoption of climate-risk insurance products, we run financial education and awareness campaigns to enhance their financial literacy. This phase also includes policy dialogue at the insurance regulatory level.
Scale: The aim of this phase is to scale up commercially viable and successful products and distribution channels with the aim of reaching as many smallholders as possible.
The Syngenta Foundation builds a bridge between the demand and supply sides of the agriculture insurance market and coordinates various organizations involved. The stakeholders include farmers, cooperatives, the public sector, input suppliers, insurance companies, banks, NGOs, and mobile network operators. The illustration below gives an overview of the different actors and their roles:
SFSA’s work is guided by value chain design thinking. We focus on holistic solutions for smallholders’ financial inclusion. A profound understanding of agricultural risk enables the development of customized insurance products using mobile technology. These are bundled with agricultural advisory services, weather data, access to quality inputs, and credit. Our team has already developed, tested, and refined a diverse portfolio of agricultural insurance products.