Crop insurance, an idea worth seeding

Across sub-Saharan Africa, small farmers are the bedrock of national and regional economies—unless the weather proves unpredictable and their crops fail. The solution is insurance, at a vast, continental scale, and at a very low, affordable cost. Rose Goslinga, a citizen of Kenya, and her team pioneered an unconventional way to give farmers whose crops fail early a second chance at a growing season.

In Kenya, 1984 is known

as the year of the cup,

or the goro goro.

The goro goro is a cup used to measure

two kilograms of maize flower on the market,

and the maize flower is used to make ugali,

a polenta-like cake that is eaten
together with vegetables.

Both the maize and the vegetables are grown

on most Kenyan farms,

which means that most families can feed themselves

from their own farm.

One goro goro can feed three meals

for an average family,

and in 1984, the whole harvest

could fit in one goro goro.

It was and still is one of the worst droughts

in living memory.

Now today, I insure farmers against droughts

like those in the year of the cup,

or to be more specific, I insure the rains.

I come from a family of missionaries

who built hospitals in Indonesia,

and my father built a psychiatric hospital

in Tanzania.

This is me, age five, in front of that hospital.

I don't think they thought I'd grow up

to sell insurance. (Laughter)

So let me tell you how that happened.

In 2008, I was working

for the Ministry of Agriculture of Rwanda,

and my boss had just been promoted

to become the minister.

She launched an ambitious plan

to start a green revolution in her country,

and before we knew it, we were importing

tons of fertilizer and seed

and telling farmers how to apply that fertilizer

and plant.

A couple of weeks later,

the International Monetary Fund visited us,

and asked my minister,

"Minister, it's great that you want to help farmers

reach food security, but what if it doesn't rain?"

My minister answered proudly

and somewhat defiantly,

"I am going to pray for rain."

That ended the discussion.

On the way back to the ministry in the car,

she turned around to me and said,

"Rose, you've always been interested in finance.

Go find us some insurance."

It's been six years since,

and last year I was fortunate enough

to be part of a team that insured

over 185,000 farmers in Kenya and Rwanda

against drought.

They owned an average of half an acre

and paid on average two Euros in premium.

It's microinsurance.

Now, traditional insurance doesn't work

with two to three Euros of premium,

because traditional insurance relies on farm visits.

A farmer here in Germany would be visited

for the start of the season, halfway through,

and at the end, and again if there was a loss,

to estimate the damages.

For a small-scale farmer in the middle of Africa,

the maths of doing those visits

simply don't add up.

So instead, we rely on technology and data.

This satellite measures

whether there were clouds or not,

because think about it:

If there are clouds, then you might have some rain,

but if there are no clouds,

then it's actually impossible for it to rain.

These images show the onset of the rains

this season in Kenya.

You see that around March 6,

the clouds move in and then disappear,

and then around the March 11,

the clouds really move in.

That, and those clouds,

were the onset of the rains this year.

This satellite covers the whole of Africa

and goes back as far as 1984,

and that's important, because if you know

how many times a place has had a drought

in the last 30 years,

you can make a pretty good estimate

what the chances are of drought in the future,

and that means that you can put a price tag

on the risk of drought.

The data alone isn't enough.

We devise agronomic algorithms

which tell us how much rainfall
a crop needs and when.

For example, for maize at planting,

you need to have two days of rain

for farmers to plant,

and then it needs to rain once every two weeks

for the crop to properly germinate.

After that, you need rain every three weeks

for the crop to form its leaves,

whereas at flowering, you
need it to rain more frequently,

about once every 10 days
for the crop to form its cob.

At the end of the season,

you actually don't want it to rain,

because rains then can damage the crop.

Devising such a cover is difficult,

but it turned out the real challenge

was selling insurance.

We set ourselves a modest target

of 500 farmers insured after our first season.

After a couple of months' intense marketing,

we had signed up the grand total

of 185 farmers.

I was disappointed and confounded.

Everybody kept telling me that farmers

wanted insurance,

but our prime customers simply weren't buying.

They were waiting to see what would happen,

didn't trust insurance companies,

or thought, "I've managed for so many years.

Why would I buy insurance now?"

Now many of you know microcredit,

the method of providing small loans to poor people

pioneered by Muhammad Yunus,

who won the Nobel Peace Prize

for his work with the Grameen Bank.

Turns out, selling microcredit

isn't the same as selling insurance.

For credit, a farmer needs
to earn the trust of a bank,

and if it succeeds, the bank will advance him money.

That's an attractive proposition.

For insurance, the farmer needs to trust

the insurance company, and needs

to advance the insurance company money.

It's a very different value proposition.

And so the uptick of insurance has been slow,

with so far only 4.4 percent of Africans

taking up insurance in 2012,

and half of that number is in one country,

South Africa.

We tried for some years

selling insurance directly to farmers,

with very high marketing cost

and very limited success.

Then we realized that there were many organizations

working with farmers:

seed companies, microfinance institutions,

mobile phone companies,

government agencies.

They were all providing loans to farmers,

and often, just before they'd finalize the loan,

the farmer would say,

"But what if it doesn't rain?

How do you expect me to repay my loan?"

Many of these organizations

were taking on the risk themselves,

simply hoping that that year,

the worst wouldn't happen.

Most of the organizations, however,

were limiting their growth in agriculture.

They couldn't take on this kind of risk.

These organizations became our customers,

and when combining credit and insurance,

interesting things can happen.

Let me tell you one more story.

At the start of February 2012 in western Kenya,

the rains started, and they started early,

and when rains start early, farmers are encouraged,

because it usually means that
the season is going to be good.

So they took out loans and planted.

For the next three weeks,

there wasn't a single drop of rain,

and the crops that had germinated so well

shriveled and died.

We'd insured the loans of a microfinance institution

that had provided those loans

to about 6,000 farmers in that area,

and we called them up and said,

"Look, we know about the drought.

We've got you.

We'll give you 200,000 Euros
at the end of the season."

They said, "Wow, that's great,

but that'll be late.

Could you give us the money now?

Then these farmers can still replant

and can get a harvest this season."

So we convinced our insurance partners,

and later that April, these farmers replanted.

We took the idea of replanting to a seed company

and convinced them to price the cost of insurance

into every bag of seed,

and in every bag, we packed a card

that had a number on it,

and when the farmers would open the card,

they'd text in that number,

and that number would actually help us

to locate the farmer

and allocate them to a satellite pixel.

A satellite would then measure the rainfall

for the next three weeks,

and if it didn't rain,

we'd replace their seed.

One of the first —

(Applause) — Hold on, I'm not there!

One of the first beneficiaries
of this replanting guarantee

was Bosco Mwinyi.

We visited his farm later that August,

and I wish I could show you the smile on his face

when he showed us his harvest,

because it warmed my heart

and it made me realize why selling insurance

can be a good thing.

But you know, he insisted

that we get his whole harvest in the picture,

so we had to zoom out a lot.

Insurance secured his harvest that season,

and I believe that today,

we have all the tools to enable African farmers

to take control of their own destiny.

No more years of the cup.

Instead, I am looking forward to, at least somehow,

the year of the insurance,

or the year of the great harvest.

Thank you.

(Applause)