WEF_GrowAfrica_AnnualReport2014

2013 in Review 2013 in Review
SPOTLIGHT
Kilimo Salama – Insuring smallholder
incomes against weather risks
CONSTRAINTS
Regional trade prospects are hampered
while land-locked with unstable neighbours
Formal lending to agriculture is severely hampered
by a number of factors, including the seasonal and
high-risk nature of agricultural activities, and lenders’
inexperience with agribusiness. Yet access to financial
services for all types of producers and agri-enterprises
remains key to unlocking Africa’s agricultural growth
potential. To address this constraint, a scheme called
Kilimo Salama (Kiswahili for “safe farming”) has been
launched in Rwanda after being successfully piloted in
Kenya.
The initiative is the fruit of a public-private partnership
between MINAGRI, Swiss Re Corporate Solutions, the
Syngenta Foundation for Sustainable Agriculture, One
Acre Fund/Tubura, Access to Finance Rwanda (AFR)
and Rwandan insurer SORAS.
Kilimo Salama aims to reduce the risk from adverse
weather and thereby provide a much-needed safety
net for smallholder farmers, promoting increased
agricultural investment and improved livelihoods.
It offers low-cost micro-insurance to over 100,000
maize and bean farmers in the southern and western
provinces of Rwanda, protecting them from financial
loss in the event of weather damage to crops.
Insurance cover is bundled with loans provided by
One Acre Fund/Tubura for fertiliser and other farmrelated
items, and premiums are paid as part of loan
repayments.
However, administering potential claims from so many
smallholders conventionally would require costly
and resource-intensive field assessments, leading
to possible significant delays in crucial pay-outs to
distressed farmers.
To overcome this challenge, Kilimo Salama has
developed an innovative and cost-effective alternative
using eight automated weather stations, all equipped
with transmission systems broadcasting weather
updates and rainfall data, and installed in participating
provinces with funding from AFR. When a station
detects conditions detrimental to crops, a pay-out
is triggered subject to insured farmers fulfilling their
obligation to employ sound farming practices.
The system proved its worth in February 2014, when
more than 7,000 maize farmers from Bugesera, Ngoma
and Kirehe districts received insurance pay-outs
totalling around $62,000 without having to submit any
claim and without any field visits being required to
assess the damage.
The key to the success of the Kilimo Salama pilot in
Kenya was, according to Christina Ulardic, Swiss Re
Corporate Solutions’ Head of Market Development
Africa, that “risk transfer is bundled with agricultural
inputs and loans”. Another success factor is the
existence of inherent alternative distribution channels
via local lenders and agricultural dealer networks.
Rwanda’s Minister of Agriculture and Animal
Resources, Dr Agnes Kalibata has acknowledged the
initiative’s potential to reach more than 300,000 farmers
within the first three years. The scheme also has the
knock-on effects of encouraging farmers to invest
in higher-quality seeds and fertiliser (which weather
risks to livelihoods often deter), as well as boosting
commercial bank and microfinance institution loan
portfolios to smallholders, due to the risk mitigation
impact of the insurance provided.
Companies highlighted the following constraints faced by their investments. If addressed, they could strengthen the
enabling environment and unlock further investment.
1. Energy is expensive and in short supply, which makes presenting a business case for setting up processing or
storage facilities that are energy-intensive particularly challenging. This is compounded by much of Rwanda’s
energy sources being transported overland, adding considerable costs. Nonetheless, the government is actively
developing its strategy for improving energy infrastructure, and considering ways to mitigate costs for investors
who will create value-adding operations along the chain.
2. Instability in neighbouring states reduces scope for regional trade. Rwanda alone is often too small a market to
be attractive for investors, which is why the country is promoting its position as a business-friendly destination
for companies seeking to reach the much larger regional markets. However, the value of Rwanda as a gateway to
the eastern Democratic Republic of the Congo and other neighbouring states is reduced for such time as these
countries continue to slip in and out of conflict.
3. Transport costs remain stubbornly high for reaching regional markets, with Rwanda’s land-locked status
necessitating overland conveyance. The country’s regional trade strategy will only work at scale if transport is fast
and affordable, yet an insufficient level of road infrastructure, compounded by increasing fuel costs and a lack of
rail networks, create costs that undermine the viability of business cases for investments that could serve these
regional markets.
Through Kilimo Salama, 7000 farmers received insurance pay outs due to poor weather in 3 districts.
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Rwanda
Rwanda
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