By Abby Massey
Farmers hit hard by last year’s drought in the Sahel region of Africa are facing another hard season. Nigeria, which is already suffering from a devastating drought, will need up to $130 million, according to the United Nation’s humanitarian chief John Holmes, to prevent widespread hunger. Such catastrophes make agriculture a risky business for farmers and insurers. And farmers across sub-Saharan Africa consistently have trouble finding access to insurance because the risks that they face are not only high, they are hard to assess.
A report by the International Fund for Agricultural Development (IFAD) and the World Food Programme, The Potential for Scale and Sustainability in Weather Index Insurance, analyzes index insurance and its ability to be scaled up, including case studies and examples of communities benefiting from the insurance. Typical crop insurance, which is hard for poor farmers to come by in sub-Saharan Africa—requires that insurers travel to farms to assess damages from a weather related event. Index insurance, on the other hand, utilizes an index or scale based on local yields and a specific weather event that will then provide the correct amount to be paid out. This reduces cost for the insurer, making them more likely to provide service to a “risky” client such as a smallholder farmer. And, more importantly, it gives farmers the chance to survive weather catastrophes that could potentially devastate a community.
The report states that although index insurance is cost effective once implemented, it has high start-up costs and farmers not familiar with insurance can be skeptical about the system. The report calls on NGOs, the private sector and multilateral agencies, such as the World Bank and World Food Programme, to give aid to private insurance companies who are hesitant to provide the insurance.
Abby Massey is a research intern with Nourishing the Planet.