eBusiness Weekly
Business Writer
The Zimbabwe Agriculture Index Insurance project developed by the Insurance and Pensions Commission and International Finance Cooperation, which is targeted at smallholder farmers, has been launched.
The project is expected to go a long way in raising awareness of the importance of agriculture index insurance as well as the development of the index insurance market in Zimbabwe, according to IPEC Commissioner Dr. Grace Muradzikwa speaking at the launch of the project yesterday.
Dr Muradzikwa said the scope of the project includes assessment of the risks smallholder farmers face, how they are coping with those risks, and gauge their appetite for agricultural insurance.
It will also involve development of a regulatory framework and enabling
environment for agricultural insurance and determine the features of insurance products appropriate for Zimbabwe’s farmers.
Further, Dr Muradzikwa explained, the project scope will include facilitation of knowledge exchanges to help insurance providers learn best practices from more developed agri-insurance markets.
Following the project launch, the next step is now to assess the market. This consist of the agricultural value chain assessment, engagement with insurers and farmers to assess the demand and supply of agriculture index insurance products and associated constraints.
Part of this stage has already been accomplished with the hiring of survey and risk modelling consultants, Dr Muradzikwa revealed.
“The stages will also see analysis of the regulatory and policy environment,” she said.
After the market assessment stage, the next step would be regulatory framework development.
This stage entails regulatory gap analysis and knowledge exchange forums to inform the development of the agriculture index regulatory framework.
“A roadmap for the implementation of the agriculture index insurance in Zimbabwe will also be developed Zimbabwe,” said Dr Muradzikwa
“We expect that effective June 2023 the project would have been completed and a regulatory framework to regulate agriculture index insurance would be in place.”
Dr Muradzikwa said work on the Zimbabwe Agriculture Index Insurance project comes at a time “the agricultural sector is faced with uncertainty due to climate variability and change”.
“While agricultural insurance can play a major role in protecting farmers, premiums generated from the sector remain very low, averaging about 3 percent of the Gross Premium Written,” she highlighted.
Dr Muradzikwa however said there are a number of factors behind these low figures.
“Among them, unaffordability of existing agricultural insurance products, inappropriate products, low levels of awareness on the role of insurance by farmers, especially smallholder farmers, and lack of trust between insurers and farmers”.
“Notwithstanding these factors, the reality is that climate change can no longer be ignored,” she said.
“It has already demonstrated how devastating it can be, including in the agricultural sector. Agriculture index insurance provides protection to vulnerable households against specific weather shocks such as drought, flooding, and hail among others.
“It is against this background that IPEC has partnered with IFC in this agriculture index insurance project to come up with a solution for smallholder farmers.”
The IFC and IPEC in February 2022, signed an agreement, under the banner – Agriculture Insurance Support Project whose objective is to develop agricultural index-based insurance to protect smallholder farmers from climate-related crop losses in Zimbabwe.
The Zimbabwe project will draw on the experience of the Global Index Insurance Facility (GIIF), through which IFC has supported the growth of agriculture/climate insurance markets in Cameroon, Cote d’Ivoire, Mozambique, Nigeria, Senegal, Zambia, and elsewhere.
The objective of the feasibility study is to assess the potential demand for index insurance across different value chains and regions; existing index-based products and supply constraints; the appetite for index insurance among reinsurers, insurers, and insurance intermediaries; and current enabling environment characteristics.
Upon successful completion of the project, agricultural index-based insurance will be offered by insurance entities, not by IFC and IPEC.
Speaking during the launch, Adamou Labana, International Finance Corporation (IFC) Country Manager for Southern Africa, said the new partnership “will allow IPEC and IFC to develop a solid foundation for agriculture insurance in the country”.
“We believe that a strong and inclusive insurance market will strengthen the resilience of farmers at all scales of production, and will ultimately improve farmers’ access to other products and services such as quality inputs and financing.
“Supporting the agribusiness sector and financial inclusion are important elements of IFC’s strategy for Zimbabwe,” said Labana.
Also read: Agric insurance necessary for farmers
