Pilot Launch | Smart Contract-Based Weather Index Insurance for Smallholder Farmers in Kenya

Lillian Alexander
Mercy Corps Ventures
5 min readMay 17, 2021


By: Elias Nure (Project Management and Regional Technology Expert, Mercy Corps AgriFin)

FinX has launched its second pilot in collaboration with ACRE Africa, Etherisc, Mercy Corps AgriFin, and APA Insurance to test smart contract-based weather index insurance with over 10,000+ smallholder farmers in Kenya. This is made possible in partnership with the Ethereum Foundation and ChainLink. For several years, firms and academic studies have suggested that smart contracts have the potential to transform the economics and experience of index insurance for smallholder farmers. For example:

Through this pilot, for the first time, we are integrating blockchain smart contracts into an existing weather index product at scale to measure the impact on operational costs, streamlining and simplifying payouts, and automating claim inquiries. Will this integration result in an improved farmer (client) experience? Increased trust in insurance? The results aren’t in yet, but here’s a little more about the WHY behind this pilot and our aspirations.

Smallholder farmer, Kenya. Photo courtesy of Mercy Corps.

Status Quo

Less than 20% of smallholder farmers worldwide have crop insurance, and the numbers in Sub-Saharan Africa are even lower — a meager 3% accessing crop insurance (GSMA, 2020). Despite robust products and services, studies have reported that selling insurance to farmers is extremely challenging and uptake of these products remains low. Some of the main issues include: inhibitive product design and fit, lack of awareness and basic understanding of insurance products, high premium costs, and complex and multi-step claim settlement processes. Even when farmers do buy insurance, these same barriers have hampered and discouraged some from extending their coverage and, in some instances, continuing their coverage for subsequent seasons. This further exposes farmers to risk in the case of an extreme weather event.

ACRE Africa is an index insurance service provider based in Kenya, covering around 1.7 million smallholder farmers across East Africa. According to Patrick Sampao, Digital Product Manager, “One of the biggest challenges that has hindered the uptake of microinsurance, including agricultural insurance, is trust”. Nearly 45% of 241 surveyed farmers in a 2020 study reported they were dissatisfied with ACRE Africa — top reasons for their dissatisfaction included: lack of communication around claim status, not receiving payouts despite facing weather shocks, and lack of company follow-up after registering for the service. These complaints are not unique to ACRE, as others trying to tackle this nascent market face similar challenges.

Advertisement material used to socialize and promote the smart contract weather-based index insurance product

FinX Hypothesis

FinX is testing whether blockchain-based smart contracts can measurably improve weather index insurance products resulting in increased trust and uptake among customers and eventually improved farmer resilience to weather shocks in the following ways:

  • reduce operational overhead costs
  • provide greater client transparency
  • facilitate faster payouts

Pilot Summary

First, Etherisc has integrated an Ethereum-based smart contract platform into ACRE Africa’s existing weather index insurance product, “Bima Pima”. Earlier this year, ACRE recruited and trained approximately 300 Village Based Agents (VBAs) on the mechanics and benefits of the updated insurance product. The VBAs sold these new policies throughout 17+ counties across Kenya to over 10,000+ smallholder farmers during the 2021 long rains season.

After purchase, clients can update policies and monitor claims at their own convenience through ACRE’s farmer-facing USSD platform. In an extreme weather event, the policies are automatically triggered — facilitating fair, transparent, and timely payouts. By removing a third party verifier, this model reduces the number of intermediaries, minimizes overhead, and increases policy coverage.

Process flow for the blockchain-based smart contract automated insurance product

Early Payouts

To further test the impact of timely payouts, ACRE Africa has introduced a mid-season payout that will be offered to a randomly selected cohort drawn from the full sample of onboarded farmers. This early compensation will be offered after 50 days, corresponding to the first two crop cycles — the germination and vegetative phases. Parameters that will trigger payouts have been inputted into the platform, which will automatically disburse the payouts to eligible farmers at the end of the two crop stages.

Learning & Impact

Through this pilot, FinX will examine how, and to what degree, this smart contract integration improves farmers’ affordability, experience, understanding, and utilization of crop insurance. This pilot intends to address two interrelated problems: (1) Limited farmer awareness of insurance products and trust in insurance given the complex claim settlement and opaque claim querying processes and (2) ACRE Africa’s specific struggles with low uptake and customer retention.

FinX aspires to learn:

  1. Can ACRE Africa automate insurance payouts using smart contract insurance and minimize operational overhead, providing greater client savings?
  2. Can blockchain-based insurance contracts increase trust by providing transparency to clients?
  3. Can faster payouts and mid-season payouts improve farmer resilience to weather shocks?

To answer these questions and effectively measure the impact of this pilot, FinX will use a combination of point of sale records, transaction-level blockchain data, and phone surveys with farmers to quantify changes in insurance adoption, payout speeds, and sum insured, as well as capture overall customer awareness and satisfaction.

A group of farmers from Uasin Gishu county after a training session on the new insurance product


This pilot was formally kicked off in January 2021 and is expected to run until the end of Kenya’s long rains season. ACRE Africa, with the support of Etherisc, has successfully integrated blockchain-based smart contracts into their weather index insurance product. To date, ACRE’s 300 village agents have registered over 12,900 clients for the updated insurance product, already surpassing the goal of reaching at least 10,000 farmers by the end of May. Stay tuned for further results and learnings in Part 2 of this blog series!