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In Kenya, 1984 is known
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as the year of the cup,
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or the goro goro.
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The goro goro is a cup used to measure
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two kilograms of maize flower on the market,
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and the maize flower is used to make ugali,
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a polenta-like cake that is eaten
together with vegetables.
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Both the maize and the vegetables are grown
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on most Kenyan farms,
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which means that most families can feed themselves
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from their own farm.
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One goro goro can feed three meals
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for an average family,
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and in 1984, the whole harvest
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could fit in one goro goro.
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It was and still is one of the worst droughts
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in living memory.
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Now today, I insure farmers against droughts
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like those in the year of the cup,
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or to be more specific, I insure the rains.
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I come from a family of missionaries
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who built hospitals in Indonesia,
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and my father built a psychiatric hospital
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in Tanzania.
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This is me, age five, in front of that hospital.
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I don't think they thought I'd grow up
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to sell insurance. (Laughter)
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So let me tell you how that happened.
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In 2008, I was working
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for the Ministry of Agriculture of Rwanda,
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and my boss had just been promoted
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to become the minister.
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She launched an ambitious plan
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to start a green revolution in her country,
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and before we knew it, we were importing
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tons of fertilizer and seed
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and telling farmers how to apply that fertilizer
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and plant.
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A couple of weeks later,
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the International Monetary Fund visited us,
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and asked my minister,
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"Minister, it's great that you want to help farmers
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reach food security, but what if it doesn't rain?"
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My minister answered proudly
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and somewhat defiantly,
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"I am going to pray for rain."
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That ended the discussion.
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On the way back to the ministry in the car,
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she turned around to me and said,
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"Rose, you've always been interested in finance.
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Go find us some insurance."
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It's been six years since,
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and last year I was fortunate enough
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to be part of a team that insured
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over 185,000 farmers in Kenya and Rwanda
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against drought.
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They owned an average of half an acre
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and paid on average two Euros in premium.
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It's microinsurance.
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Now, traditional insurance doesn't work
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with two to three Euros of premium,
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because traditional insurance relies on farm visits.
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A farmer here in Germany would be visited
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for the start of the season, halfway through,
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and at the end, and again if there was a loss,
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to estimate the damages.
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For a small-scale farmer in the middle of Africa,
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the maths of doing those visits
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simply don't add up.
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So instead, we rely on technology and data.
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This satellite measures
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whether there were clouds or not,
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because think about it:
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If there are clouds, then you might have some rain,
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but if there are no clouds,
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then it's actually impossible for it to rain.
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These images show the onset of the rains
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this season in Kenya.
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You see that around March 6,
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the clouds move in and then disappear,
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and then around the March 11,
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the clouds really move in.
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That, and those clouds,
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were the onset of the rains this year.
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This satellite covers the whole of Africa
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and goes back as far as 1984,
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and that's important, because if you know
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how many times a place has had a drought
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in the last 30 years,
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you can make a pretty good estimate
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what the chances are of drought in the future,
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and that means that you can put a price tag
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on the risk of drought.
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The data alone isn't enough.
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We devise agronomic algorithms
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which tell us how much rainfall
a crop needs and when.
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For example, for maize at planting,
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you need to have two days of rain
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for farmers to plant,
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and then it needs to rain once every two weeks
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for the crop to properly germinate.
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After that, you need rain every three weeks
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for the crop to form its leaves,
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whereas at flowering, you
need it to rain more frequently,
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about once every 10 days
for the crop to form its cob.
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At the end of the season,
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you actually don't want it to rain,
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because rains then can damage the crop.
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Devising such a cover is difficult,
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but it turned out the real challenge
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was selling insurance.
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We set ourselves a modest target
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of 500 farmers insured after our first season.
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After a couple of months' intense marketing,
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we had signed up the grand total
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of 185 farmers.
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I was disappointed and confounded.
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Everybody kept telling me that farmers
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wanted insurance,
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but our prime customers simply weren't buying.
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They were waiting to see what would happen,
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didn't trust insurance companies,
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or thought, "I've managed for so many years.
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Why would I buy insurance now?"
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Now many of you know microcredit,
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the method of providing small loans to poor people
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pioneered by Muhammad Yunus,
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who won the Nobel Peace Prize
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for his work with the Grameen Bank.
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Turns out, selling microcredit
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isn't the same as selling insurance.
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For credit, a farmer needs
to earn the trust of a bank,
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and if it succeeds, the bank will advance him money.
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That's an attractive proposition.
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For insurance, the farmer needs to trust
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the insurance company, and needs
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to advance the insurance company money.
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It's a very different value proposition.
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And so the uptick of insurance has been slow,
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with so far only 4.4 percent of Africans
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taking up insurance in 2012,
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and half of that number is in one country,
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South Africa.
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We tried for some years
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selling insurance directly to farmers,
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with very high marketing cost
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and very limited success.
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Then we realized that there were many organizations
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working with farmers:
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seed companies, microfinance institutions,
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mobile phone companies,
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government agencies.
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They were all providing loans to farmers,
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and often, just before they'd finalize the loan,
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the farmer would say,
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"But what if it doesn't rain?
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How do you expect me to repay my loan?"
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Many of these organizations
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were taking on the risk themselves,
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simply hoping that that year,
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the worst wouldn't happen.
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Most of the organizations, however,
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were limiting their growth in agriculture.
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They couldn't take on this kind of risk.
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These organizations became our customers,
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and when combining credit and insurance,
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interesting things can happen.
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Let me tell you one more story.
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At the start of February 2012 in western Kenya,
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the rains started, and they started early,
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and when rains start early, farmers are encouraged,
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because it usually means that
the season is going to be good.
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So they took out loans and planted.
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For the next three weeks,
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there wasn't a single drop of rain,
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and the crops that had germinated so well
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shriveled and died.
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We'd insured the loans of a microfinance institution
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that had provided those loans
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to about 6,000 farmers in that area,
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and we called them up and said,
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"Look, we know about the drought.
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We've got you.
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We'll give you 200,000 Euros
at the end of the season."
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They said, "Wow, that's great,
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but that'll be late.
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Could you give us the money now?
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Then these farmers can still replant
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and can get a harvest this season."
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So we convinced our insurance partners,
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and later that April, these farmers replanted.
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We took the idea of replanting to a seed company
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and convinced them to price the cost of insurance
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into every bag of seed,
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and in every bag, we packed a card
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that had a number on it,
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and when the farmers would open the card,
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they'd text in that number,
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and that number would actually help us
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to locate the farmer
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and allocate them to a satellite pixel.
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A satellite would then measure the rainfall
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for the next three weeks,
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and if it didn't rain,
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we'd replace their seed.
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One of the first —
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(Applause) — Hold on, I'm not there!
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One of the first beneficiaries
of this replanting guarantee
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was Bosco Mwinyi.
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We visited his farm later that August,
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and I wish I could show you the smile on his face
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when he showed us his harvest,
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because it warmed my heart
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and it made me realize why selling insurance
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can be a good thing.
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But you know, he insisted
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that we get his whole harvest in the picture,
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so we had to zoom out a lot.
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Insurance secured his harvest that season,
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and I believe that today,
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we have all the tools to enable African farmers
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to take control of their own destiny.
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No more years of the cup.
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Instead, I am looking forward to, at least somehow,
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the year of the insurance,
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or the year of the great harvest.
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Thank you.
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(Applause)