Kenyan farmers want agric insurance with inputs and 81% recommend it
Embedding insurance in Climate Resilience Programmes: Takeaways from Kenya
Context
The incomes and livelihoods of smallholder farmers are increasingly affected by extreme weather events or crop damage from pests and diseases. Agricultural insurance, which lies at the intersection of financial inclusion and social protection, is emerging as an effective risk management tool for farmers, which can contribute to critical public policy objectives such as increased food security and climate change adaptation.
The Kenya Cereal Enhancement Programme (KCEP) was launched in 2014 with the aim of contributing to national food security and smallholder income generation by increasing the productivity of key cereals. The KCEP — Climate Resilient Agricultural Livelihoods (KCEP-CRAL) initiative is an expansion of the programme to cover the arid and semi-arid lands (ASALs) of Kenya with the aim to graduate ASAL smallholder farmers to market-oriented and commercial farming.
Pula has worked closely with IFAD’s INSURED and the KCEP-CRAL PCU, Co-operative Bank of Kenya, Equity Bank, APA Insurance, the County/Sub County Agricultural Officers, and other programme partners to embed area yield index insurance (AYII) with the subsidized input supply under KCEP-CRAL programme in 8 ASAL counties i.e. Embu, Tharaka Nithi, Kitui, Makueni, Machakos, Kwale, Kilifi, and Taita Taveta for selected crops (maize, sorghum and the associated pulses, beans, green grams and cowpeas). The Government of Kenya has rolled out key innovations under this programme, which are critical for the broader sector to take note of — gradually decreasing subsidies on inputs and trying both mandatory and voluntary uptake of insurance with inputs. As part of the above partnership, Pula is also contracted to conduct research and analyses to highlight the key lessons, challenges, and achievements to pave a smoother path forward for the Government and IFAD’s INSURED programme.
In 2020, 28% of ~22k insured farmers received a payout. In 2021, 76% of the ~44k farmers enrolled in the programme received a payout as farmers faced a very difficult season with extended periods of dry spells and drought. In 2022, the Government experimented by making insurance voluntary for farmers and expectedly, there was a decline and a total of ~23k farmers chose to participate in the programme. A total of 63% of the farmers that chose to participate in the programme in 2022 were a part of the 2021 cycle and almost all returning farmers had received a payout.
Overall, a total of 107k farmers have been insured over 6 seasons in 8 ASAL counties. A total of 51,327 farmers or 52% of farmers in KCEP have received claim payments across 5 seasons. The average claim payment per farmer was 2855 Ksh per farmer or roughly 1.5 times the premium paid. On average over the 5 seasons for all counties, every farmer has received 76 cents in claims for every dollar of insurance premium paid.
Farmers’ feedback
Various research efforts have engaged with farmers to understand their perception of the insurance embedded in KCEP-CRAL and its impact. We believe these insights will greatly inform how agricultural insurance could be bundled in any Kenyan government programme.
Farmers reported improvements in their lives: 9 out of 10 farmers reported an improvement in their lives, with higher food access and higher affordability for their children’s education and household expenses. Specific to insurance, about 6 out of 10 farmers reported higher reliability in their incomes. About 89% of farmers reported a negative shock to their households in the past 12 months and between 80%-90% of farmers, across the payout groups, reported that the insurance payout helped them in their recovery after a shock. Women were slightly more likely to report a negative shock and more likely to report insurance as having positive effects on their recovery.
Farmers reported reduced reliance reliance on negative coping mechanisms such as selling livestock, using savings, borrowing money or looking for alternative sources of income after getting access to insurance embedded in KCEP-CRAL. A gender-disaggregated perspective establishes similar effects with women reporting a greater reduction in their use of savings and on borrowing money after a season of crop loss.
Farmers want more financial literacy on insurance: Lack of adequate awareness and inadequate compensation after crop loss were reported to be the main challenges. While inadequate compensation can be an expected grievance with any insurance intervention, the need to better understand the details of the insurance component stood out as a challenge. Farmers currently receive about 400 texts and about 250–400 calls per year for various government initiatives, disaster warnings, input supply, and farmers’ cooperative activities.
This includes about 15–20 texts about KCEP-CRAL from the Government and Pula. Pula and KCEP-CRAL need to work together to streamline their communication for effective awareness generation in the long rain season of 2023. It would be critical to reinforce digital communication with cost-effective blending of in-person awareness creation.
Farmers overwhelmingly want insurance to stay bundled with KCEP-CRAL inputs: Counties that had experienced more climate risks and thus their farmers had received higher payouts, overwhelmingly said they would not buy inputs without insurance. While even in low payout counties, farmers wished that insurance remained mandatory so that the individuals from the farming community didn’t have to decide every year whether they should buy insurance or not. Through farmer surveys, we observed that 83% of farmers in the ‘No payout’ areas also wanted insurance to remain bundled with inputs compared to 93% in the ‘High payout’ areas. About 41% of farmers in areas with payouts want insurance to be mandatory with inputs.
More than 4 out of 5 farmers would recommend crop insurance to friends and family: Except for the ‘No payout’ group, this is common across all the other payout groups. About 44% of farmers would recommend it for covering various climate risks while another 34% of farmers would recommend it for the farming advisory services. Additionally, 60% of the farmers reported insurance to be ‘value for money’ for them.
Key considerations for insurance-embedded agricultural programmes
Targeted awareness creation is needed: A better blend of digital interventions and in-person awareness creation (leveraging multiple relevant actors) is likely to be the most useful form of cost-effective engagement with farmers.
Insurance needs to be mandatorily embedded with inputs: To further increase uptake and impact, it’s critical to make insurance mandatory along with input or credit provision, which also helps in cross-subsidizing for regions that are much more at risk.
Reduce delays in premium collection and delivery of payouts: Keep driving improvements in farmer data and premium collection to enable timely engagements that further enable quicker payouts.
INSURED’s perspective on this project: https://www.farm-d.org/action/do-farmers-really-favour-mandatory-crop-insurance/
About INSURED
A US$6 million programme financed by Sida (the Swedish International Development Cooperation Agency) and implemented by IFAD through the Platform for Agricultural Risk Management (PARM). The five-year programme’s goal is threefold:
- Increase the resilience of poor rural households in the face of climate risks
- Build their capacity to manage risks
- Strengthen their livelihoods.
READ MORE — www.ifad.org/en/insured www.ifad.org/insurance-toolkit
WATCH — https://www.youtube.com/watch?v=x2O-DvEnbAs
CONTACT — insured@ifad.org
