eBusiness Weekly
Tawanda Musarurwa
LOW agricultural insurance uptake by smallholder farmers is typically attributed to a number of factors on the farmers’ side, namely: a lack of awareness, inadequate knowledge of the available products, and perhaps a false sense of security.
But poor — or at least inappropriate — product design could also be a big issue.
The figures on agricultural insurance uptake in the country do not make for good reading.
‘‘Agricultural insurance uptake is currently averaging 5 percent of the total short-term insurance business,’’ said Insurance Council of Zimbabwe (ICZ) marketing and public relations manager, Ms Ringisayi Batiya.
She said tobacco insurance and crop insurance are the main covers being taken out, mostly by commercial farmers and those on contract farming arrangements.
This leaves out, arguably, the most significant segment of agricultural output in the country.
According to the Zimbabwe National Statistics Agency (ZimStat)’s Zimbabwe Smallholder Agricultural Productivity Survey 2017 Report, there were approximately 9 655 small-scale commercial farms in Zimbabwe with an average size of 148 hectares, while communal lands (accounting for 51 percent of Zimbabwe’s population) occupied 42 percent of total land area.
From a macro-economic perspective, agriculture is the backbone of Zimbabwe’s economy as it accounts for the biggest portion of household incomes.
Given the obvious importance of agriculture to the economy, and also in view of how the sector is vulnerable to the vagaries of climatic conditions (add to that worsening climate change issues), it is ironic that the majority of agricultural producers operate without any sort of insurance.
This is perhaps because, as aforementioned, insurers have been trying to fit a square plug in a round hole. Pre-existent agricultural insurance products were created for large-scale farmers, and just do not address the nuanced problems of small agricultural players.
That is why earlier this year, the country’s insurance regulator, the Insurance and Pensions Commission (IPEC) and the International Finance Corporation (IFC) partnered to create a market for agricultural insurance products in Zimbabwe to protect smallholder farmers from weather-related crop damage and other shocks.
Through the partnership, IFC will assess the risks smallholder farmers face, how they are coping with those risks, and will gauge the farmers’ appetite for agricultural insurance to protect their livelihoods.
The IFC will also help IPEC develop a regulatory framework and enabling environment for agricultural insurance and determine the features of insurance products appropriate for Zimbabwe’s farmers.
According to IPEC public relations manager Mr Lloyd Gumbo, a weather index insurance pilot project is currently underway in this regard.
A potentially ‘‘bigger’’
game changer
But a potentially bigger game-changer in the country’s agricultural insurance matrix was launched recently.
AFC Insurance Company, a subsidiary of AFC Holdings (formerly Agribank) recently launched an area-yield index insurance product that is expected to be rolled out as part of Government-driven agricultural programmes, such as the climate-proofed Presidential Input Scheme, Pfumvudza/Intwasa.
The product has the potential to bring a large number of small-scale and communal farmers into the insurance fold.
‘‘The area-yield index product covers even the smallest of plot sizes,’’ said AFC Insurance Company general manager, Mr Cuthbert Masukume.
With a history that dates back to the 1950s, area-yield index insurance model’s indemnity is based on the realised (harvested) average yield of an area such as, for example, a district.
The insured yield is established as a percentage of the average yield for the area, usually ranging between 50 to 90 percent of the area average yield.
According to AFC, subscribed farmers will get a 60 percent payout, if their crops fail to reach expected yields due to climatic conditions.
Speaking on the sidelines of the launch in Rushinga, Lands, Agriculture, Fisheries, Water and Rural Development permanent secretary, Dr John Basera, said they are aiming to have area yield index insurance as one of the major input items under programmes such as Pfumvudza/Intwasa and the Presidential Cotton Input Scheme.
‘‘Climate change is indeed hitting us hard. Each time we are affected by drought or floods, there is a significant spike down in terms of the agriculture GDP, the household GDP, and the overall economy.
‘‘We believe that area yield index insurance will reduce Government’s exposure in terms of double dependency, whereby we have to provide households with input items such as seed, fertilisers and chemicals, then after being hit by drought we have to come in with some food aid.’’
The pilot project for the area yield index insurance product was carried out in Rushinga, which has a humid sub-tropical, dry winter climate, and is therefore very prone to droughts.
For Rushinga farmers who were part of the pilot project and incurred losses during the 2021/2022 agricultural season, AFC Insurance paid out a total of US$123 903.
AFC Insurance’s area-yield index insurance and, in particular, its proposed linkage to Government-driven agricultural programmes will give it what most agricultural insurance products lack: scale, partnerships and trust.
