Grant agreement: Crop Insurance Program for smallholder farmers in Kenya

A new project offers smallholder farmers in Kenya the opportunity to insure themselves against the consequences of drought.

Frankfurt, Nairobi, 24 June 2021

Agriculture and livestock account for one third of Kenya’s annual economic output. However due to climate change weather patterns are becoming ever more unpredictable exposing Kenya´s farmers especially to the impact of droughts. Smallholder farmers who practice rain-fed agriculture and use low-technology farming methods are particularly vulnerable to droughts, given that less than 1% are currently protected by some form of insurance.

To tackle this challenge InsuResilience Solutions Fund (ISF), managed by Frankfurt School of Finance and Management (FS) and funded by KfW Development Bank, has signed a grant agreement supporting the development of an insurance scheme for Kenya’s smallholder farmers. The project is implemented by a partnership encompassing ACRE as one of the largest micro-insurance provider in Africa, the international research and development organization, Alliance of Biodiversity International and International Center for Tropical Agriculture (CIAT) and VanderSAT, a leading provider of global satellite-observed data. ISF is providing co-funding for the product development of the agriculture insurance solution.

The project will work closely with the Kenyan Ministry of Agriculture, Livestock and Fisheries (MoALF) as part of its climate smart insurance strategy for smallholder farmers.

The project combines the implementation of two technological innovations in climate risk insurance: soil moisture index insurance and a picture-based loss verification tool. By introducing these technological innovations into insurance product design, the aim is to minimise the cost of loss verification and make crop insurance more attractive and accessible to smallholder farmers, while optimising the technical product design over time. At the same time the picture-based tool helps smallholder farmers in reducing future losses due to drought by offering advisory services to farmers, including both climate smart agriculture practices and weather related decision support.

The product is distributed directly to smallholder farmers as a micro insurance product through trained champion farmers. Furthermore the insurance cover is also offered to agri-service providers such as financial institutions and input providers as well as to county governments.

The result is a versatile product that strengthens the resilience of smallholder farmers against climate change.