Climate change and recurring drought severely affects crop production in Sub-Saharan Africa, keeping farmers stuck in poverty. Insurance can play a key role in escaping this poverty trap. Insurance is also expected to unlock credit, allowing farmers to invest in better inputs and to increase production and income. Within SUM-Africa satellite-based information is used to provide low-cost drought insurance for smallholder farmers in Mali and Uganda.
Relative evapotranspiration drought index (RE)
Drought index insurance products are based on Meteosat derived Relative Evapotranspiration (RE), which is proportional to crop growth and an excellent indicator of agricultural drought. Historical data is available for the entire African continent from 1982 to date and is used for risk assessment and insurance pricing. Near real-time satellite data reception and processing supports daily growing season monitoring and rapid loss assessment and pay-out calculation. These index insurance services are delivered through a consortium of index provider, insurers, brokers and aggregators.
The target group consists of 9 million smallholder farmers in Mali and Uganda. The objective is to serve 430,000 of these farmers within 3 years, and 1 million within 6 years after the start of the project.
Agricultural insurance in Africa is virtually non-existent. Traditional insurance, based on actual losses, is too expensive. Insurance based on weather indices is often considered an inexpensive alternative, but there is an insufficient number of weather stations in Africa, while new ones lack the historical records required for risk assessment. Meteosat derived RE and CCD provide a good alternative, because 33 years’ worth of data is available at 3 km resolution for every location in Africa, while monitoring continues in real time. Therefore, this insurance allows for scaling up to corresponding economies, enabling affordable insurance for small scale farmers. With an anticipated consortium income of 1.2 euro per smallholder farmer per year, the business becomes financially sustainable when 1 million farmers will sign up for insurance within 6 years. The G4AW subsidy covers a large part of the initial investment and reduces the financial risk considerably.
The partnership has been established on the basis of R&D activities during the project FESA Micro-insurance (2009-2013), a millennium project of the Dutch Ministry of Foreign Affairs. The SUM-Africa consortium consists of the following partners:
|Region||East Africa,West Africa|
|Period||2014 - 2017|
|Targeted end users||smallholder farmers in Mali and Uganda|