Insuring against bad weather
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CTA. 2008. Insuring against bad weather. Rural Radio Resource Pack 08/4. Wageningen, The Netherlands: CTA.
Permanent link to this item: http://hdl.handle.net/10568/57210
A weather-linked micro-insurance scheme in Malawi which enables small-scale commercial farmers to insure their crops against droughts and floods.
Insuring against bad weather Cue: Do you run a business? If so, what risks do you face? Maybe you fear that your goods might be stolen or damaged, or that you will lose your market to competitors. In some cases you may be able to get some financial protection by taking out an insurance policy. But what about farmers? Farmers face significant risks in growing and harvesting a crop: risk of pests and disease outbreaks, of drought or flooding, and risk that their crops may be damaged in storage or during transport. Is there anything you can do as a farmer to protect yourself? In Malawi, Opportunity International bank is offering a way for farmers to be insured against at least some risks. The bank is helping farmers to buy weather-linked crop-insurance policies. As a result, if crops fail because of bad weather, farmers automatically receive financial compensation for their losses. Bank employee Gift Livata explained more to Excello Zidana, about how Malawi is taking the lead in crop insurance for farmers. IN: ?The micro-insurance policies work? OUT: ?pioneer of this crop insurance.? DUR?N: 4?32? BACK ANNOUNCEMENT: Gift Livata of Opportunity International in Malawi, on a new type of crop insurance aimed at small-scale commercial farmers. The interview comes from a resource pack produced by CTA. Transcript Livata The micro-insurance policies work in the way that we link the farmers with the insurance companies. And we secure the crop that the farmers are growing from the risk of weather calamities, such as drought and floods and excess rainfall. Zidana What kind of farmers have been asking for this insurance? I?m talking about the scale of the farmers. Are they commercial or subsistence? Which ones? Livata Yes, the interest of the bank is on small-scale commercial farmers. Why we are interested in small-scale commercial farmers is that, what we give them is a loan. We give them a loan for inputs and also a loan for the insurance premiums. So the subsistence farmer might not be able to pay. But the smallholder commercial farmer, if they have a little of a cash crop plus a food crop, from the cash crop they should be able to pay back the loan. Zidana Let us go straight to the issue now. Suppose I am a farmer and I?m growing five hectares of maize or let?s say groundnuts and I want to insure that against any risk. How can I go about the whole process? Livata What you need to do is to come to the bank and apply for the loan. And once we approve your loan it means you directly access the crop insurance. But now beyond that of course there is a requirement that as a farmer, your farm should be close to a weather station. There must be a radius of not more than 30 kilometres from the weather station to your farm. If you are within this radius then you automatically qualify for this crop insurance. And once you qualify for the crop insurance there is no need for you to fill any form or to apply to the insurance companies. The rest of the job is done by the bank. Zidana Now how does the bank verify the type of enterprise the farmers are involved in? Livata We verify of course the enterprise that the farmer is doing. Basically most of the time we work in alliance with organisations that are able to provide technical services to the farmers. Because we don?t want the farmer to lose their crop because they lacked maybe some technical expertise. And in line with this we have also a unit within the bank that go and visit the farmers and make sure that they followed all the good agricultural practices. And thereafter there is no more verification that is needed. If they come with a claim to the bank we don?t need to verify anything because the farmers are within the area where rainfall is recorded. So every ten days the meteorological department provide us with data. And that data is detailed and we are able to see from which area there was a shortfall of rainfall and from which area there was maybe excess rainfall. And that rainfall that has fallen in a particular area is directly linked to the contract that the farmers are given. Zidana What happens during lean years? Do you expect farmers to submit their claims? Livata Basically we don?t expect farmers to come and submit their claims. This type of insurance is quite different from the traditional insurance that other organisations offer. The weather report that we receive automatically gives an indication of how much the stress the crop is under and how much the crop has suffered and that is translated to monetary value. So once we observe the data, even before the farmer thinks of coming to the bank and telling us what has happened in their field, we will already know what has happened in the field and we automatically give them what is due for them or the payout that they need to receive. Zidana What is the response like from farmers? Livata The response has been overwhelming. We started with about 500 farmers and the following year we had about 800 farmers, and this year we had over 1,000 farmers. In the coming season we are recruiting 4,000 farmers. So people are interested and they want to be recruited for this programme. Zidana Do you have any record that this is also happening in other countries within the region? Livata Malawi happens to be the pioneer of crop insurance. And of course recently there have been countries like South Africa, Angola and Kenya who want also roll out what we have been doing. But we have done it successfully and we also believe that they are also going to do it successfully. Beyond Africa I also know that it?s being done in Philippines. But here in Africa Malawi is the pioneer of this crop insurance. End of track.