Insurance for farmers: Sowing the seeds to grow Africa’s agricultural sector

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Insurance for farmers: Sowing the seeds to grow Africa’s agricultural sector

7:00 CAT | 30 Aug 2018

Photo: Supplied

Across Africa, the agricultural sector is relentlessly confronted by a multitude of severe risks. Among them, the effects of extreme weather yet – while crop and livestock losses can be crippling to farming communities and the economies that depend on their produce – protection against them has, historically, been poor.

One on hand, low-income farmers often know little about insurance or any of the other risk protection mechanisms that exist (and, even if they do, they tend to assume they are beyond their financial reach). On the other hand, the financial institutions that traditionally offer risk products to other economic sectors have been nervous to adapt them for the needs of the agricultural sector without sufficient actuarial data to inform the process.

The result, in Mozambique and elsewhere in Africa, has been a badly exposed agricultural sector, in which the subsistence smallholder farmers who make up the majority of producers, have been perilously unprotected when things go wrong.

It’s an unsustainable situation for a country in which agriculture accounts for 25 percent of GDP, believes insurer, Hollard Mozambique. And, since its establishment in Mozambique in 2001, it has piloted a number of insurance projects for low-income farming communities. The most recent of which was conducted in partnership with a team from California’s UC Davis Feed The Future AMA Innovation Lab. Of the products developed from these efforts, the most notable is a Weather Index Insurance initiative that relies on remote sensing through the advanced satellite technology.

“For the maize farmers who helped us test the waters, it’s been game-changing,” says Hollard Mozambique co-founder and insurance industry stalwart, Israel Muchena. “It has shown the potential that exists for insurance to make a meaningful contribution to the sustainability and growth of micro-enterprises – for individual farmers and their families – as well as the agricultural sector at large. So it gives me huge pleasure to announce that Hollard Mozambique is leading the way with the launch of a dedicated Agricultural division to provide sector-specific insurance solutions.”

Introducing Hollard Agri

The new division, based in Maputo, will be headed by Israel Muchena, who is passionate about providing protection to vulnerable farmers, and has been cajoled out of retirement to lead Hollard.

“It’s a very exciting time,” he says, “and we’re going to be looking at the issue holistically. So, as well as offering ground-breaking insurance products, we’ll be initiating development projects – in conjunction with agencies such as the World Bank, the International Finance Corporation (IFC), the International Fund for Agricultural Development (IFAD), Development Alternatives Inc. (DAI) and Financial Sector Deepening (FSD) – and conducting R&D to explore new products, channels and business models.“

The timing of the decision coincides with matching grants of US$300 000 each, from the IFC and IFAD, to Hollard Mozambique, to develop weather insurance products for the agricultural sector. And the hope is that “the work we do in Mozambique will ultimately be rolled out to other territories and make a significant difference to the lives of farmers across the African continent,” says Israel Muchena.

A one-day workshop, to share their recent experiences in Index-Based Agricultural Insurance and discuss the way forward, is being held by Hollard Mozambique and the US Davis Innovation Lab in Maputo on 31 August.

About Hollard Mozambique

Since opening its doors in 2001, Hollard Mozambique Companhia de Seguros SARL has established itself as a prominent player in the Mozambican insurance market. Its life insurance subsidiary, Hollard Vida, has been operating under a separate licence since 2008.

Together, they provide insurance solutions for corporate, commercial and private clients. Their products, and those of their partners, cover the full range of insurance options, including: fire, motor, liability, construction and engineering, marine, agriculture, accident, funeral and obligatory workers’ compensation.

Source: Hollard Mozambique / Press Release