, NAIROBI, Kenya, Feb 5 – The International Finance Corporation (IFC) has signed two grant agreements amounting to Sh336.7 million with Syngenta Foundation for Sustainable Agriculture to expand index-based insurance to small-scale farmers in Kenya, Rwanda and Tanzania.
The grants were issued by the Global Index Insurance Facility, a multi-donor trust fund financed by the European Union, Japan and the Netherlands and implemented by IFC and the World Bank.
In general, Index-based insurance is used to protect against shared risk such as those associated with weather fluctuations, disease outbreaks or price loss.
Through the Switzerland based Foundation, it is estimated that the project will bring index insurance to approximately one million small-scale farmers within two years in the three countries.
IFC Manager for Access to Finance in Sub-Saharan Africa David Crush noted that much of the agricultural land in Kenya, Rwanda and Tanzania is rain fed and certain regions were highly vulnerable to drought and erratic rain.
Many smallholder farmers, he said, limit their losses to extreme weather by making minimal investments into their land, leading to reduced yields and continued food insecurity.
“Index insurance helps to strengthen the livelihoods of small-scale farmers, which is one of the most important tasks in the quest to fight poverty and foster inclusive and sustainable economic growth in Africa and elsewhere,” Crush said during the signing ceremony.
Traditional indemnity-based agricultural insurance has seen numerous challenges due to also high transaction costs and premiums.
“Index-based insurance, which pays out benefits on the basis of weather data without costly field verification of losses, is a more efficient risk management tool,” Crush added.
“The insurance has given me confidence. It has transformed my attitude from subsistence farming to farming as a business. I am free from the fear of failure,” smallholder farmer Reuben Biwott from Kitale said during the event.