Tired of famine, poor yields? Try 'bundles'

What happens when small-scale farmers in Kenya and elsewhere in Africa lose their entire crop due to the vagaries of weather? Stare helplessly at hunger with the hope that the following season will have better tidings.

That, however, need no longer be the case, thanks to a new crop insurance model that cushions farmers against shocks resulting from crop failure.

Known as Pula, the agro-insurance technology addresses the shortage of smallholder crop insurance by developing products that mitigate the shortcomings of traditional insurance offerings.

The FinTech designs and sells ‘insurance bundles’ with the insurance policy embedded in a critical farm input such as seed, fertiliser or credit.

It uses satellite technology and data to provide crop insurance to an estimated 65 million small hold farmers across Africa who have little or no access to financial products.

The product by Omidyar Network was created out of the desperation small holder farmers faced as traditional insurance companies shied away from such “unpredictable” crop insurance business.

Speaking in Nairobi recently, the firm’s Investment Principal Ameya Upadhyay said smallholder farms in Kenya are generally limited in size and dispersed across large and sparse rural areas.  

He says these farm products tend to be much lower than other insurance products thus attracting no serious insurers.

“Such factors make acquiring customers, distributing products and assessing losses difficult and costly. Traditional insurance companies tend to rely on direct distribution focused on high-density areas and have ‘high-touch’ loss assessment procedures. Thus, they are unable to serve small-scale farmers especially in Africa in a profitable way,” says Upadhyay.

Currently, the crop insurance package operates in Kenya, Malawi, Zambia, and Nigeria, among other countries. It has insured over 600,000 farmers across Africa in 2017.

In Kenya, Pula insured over 250,000 farmers in 2017. It has invested in Twiga Foods, a local firm that addresses the issue of agricultural food supply, reduction of agricultural waste and enhancing farmers’productivity.
The product covers farmers in two ways – the germination insurance product and a yield insurance product.

Through the germination insurance product, Pula uses satellite data to determine whether enough rainfall has been received in a particular region.

If this is not the case, the product automatically reimburses an insured farmer through an SMS code to purchase replacement seed in time to replant during the current season.  

With the yield insurance product, an insured farmer receives a payout at the end of the harvesting season if a crop threshold yield is not achieved.

“The application assesses losses using random sample crop cuts. With both of these products, Pula helps mitigate the risk of adverse climate shocks and resultant crop losses that push the farmer into a poverty cycle,” says Upadhyay.

In addition, the data collected offers precision agronomic advice to farmers that helps reduce some of the risks of changing weather patterns thus enhancing productivity.

To get farmers on board, the firm partners with agricultural input companies and farm enterprise partners, leveraging on their distribution channel and reducing prohibitive distribution costs for low value insurance.