The following post was <a href="http://blogs.accion.org/features/changing-climate-technology-provides-agricultural-insurance-farmers/">originally published</a> on the Accion blog.
Smallholder farmers are the bedrock of sub-Saharan Africa’s and Asia’s agricultural markets, providing <a class="markup--anchor markup--p-anchor" href="http://www.fao.org/3/a-i4036e.pdf" target="_blank" rel="nofollow noopener noreferrer">over 80 percent of the food supply</a>, but they are growing increasingly vulnerable. Climate scientists estimate that over the next few decades, droughts will <a class="markup--anchor markup--p-anchor" href="https://www2.ucar.edu/atmosnews/news/2904/climate-change-drought-may-threaten-much-globe-within-decades" target="_blank" rel="nofollow noopener noreferrer">frequently affect Africa and Asia</a> as a result of climate change. As weather conditions cause decreased stability for family farms, there is an increased need for risk mitigation solutions that can add security to the lives of those most affected.
Pula, <a class="markup--anchor markup--p-anchor" href="https://www.accion.org/content/pula-secures-funding-global-investors-support-smallholder-farmers-africa-and-south-asia" target="_blank" rel="nofollow noopener noreferrer">one of Accion Venture Lab’s latest investments</a>, provides insurance to smallholder farmers across Africa and India, enabling income security for a population whose livelihoods depend on climate patterns. Pula uses cutting-edge technology coupled with expansive distribution partners to make large-scale agricultural insurance feasible for rural farmers.
Across their product portfolio, Pula uses various technologies, including automated voice calls to register customers, satellite imagery to monitor cloud cover, and SMS messages to provide agronomic advice. In the event of a drought or poor season, Pula uses weather data and yield samples to offer compensation to farmers for their losses. By coupling technology with large-scale distribution, Pula can make insurance practical for smallholder farmers at scale.
At Venture Lab, we’re most excited about a few core areas of the typical microinsurance value chain that Pula disrupts:
Eliminating the purchase barrier: Pula’s distribution model circumvents the challenges of customer adoption and education that we’ve seen insurers struggle with in the past. Customers read about Pula’s coverage on a sticker on the bag of seed or fertilizer they’re purchasing, and then they register their unique policy via their mobile phone. Pula’s partners put stickers on every bag sold in a region, and there’s no visible added cost to the products, simplifying the farmer’s decision-making process. To that farmer, Pula’s coverage is easy to activate and presents pure upside.
Increasing yields for customers with massive need: Pula focuses on some of the most vulnerable populations on Earth, and the insurance coverage is only the beginning of the benefit they receive from the product. By de-risking the purchase of farm inputs, such as seed, fertilizer, or credit, Pula is also able to incentivize farmers to purchase higher-quality products than they otherwise might — without the risk of failure. As a result, they can attain higher yields and incomes. Further, Pula provides the farmer with direct agronomic advice via SMS, leveraging the farmer’s GPS coordinates and their climate science team, and boosting the farmer’s yields.
Lowering the cost to serve: With its innovative distribution, Pula has the potential to reach a customer that has previously been prohibitively expensive to serve. Formerly, insuring smallholder farmers required multiple field visits to determine if conditions were right for crops to grow and to educate the farmer about the benefits of insurance, ultimately convincing them to pay for coverage. Pula can automate and significantly cut costs by assessing the farm’s weather remotely using satellite and regional yield data. Working through distributors also enables Pula to offer free and straightforward insurance coverage that is fully integrated with the input.
Venture Lab is thrilled to be working with the Pula team on their mission to provide insurance to smallholder farmers across Africa and Asia. Co-founder Rose Goslinga is a pioneer in the space, with a decade of experience and a <a class="markup--anchor markup--p-anchor" href="https://www.ted.com/talks/rose_goslinga_crop_insurance_an_idea_worth_seeding" target="_blank" rel="nofollow noopener noreferrer">TED talk</a> on her resume. She is working alongside Thomas Njeru, who provides actuarial experience and financial expertise as the company’s CFO.
As <a class="markup--anchor markup--p-anchor" href="https://www.microinsurancenetwork.org/sites/default/files/Microinsurance%20Network_Africa%20landscape%20full%20report-WEB_0.pdf" target="_blank" rel="nofollow noopener noreferrer">microinsurance in most African markets hovers at or below 5 percent,</a> there is a massive market opportunity to support the world’s most vulnerable as they grow food to provide for their communities. Pula tackles the arduous task of customer awareness by partnering with known brands and uses cutting-edge technology to make the product scalable. <a class="markup--anchor markup--p-anchor" href="http://www.thp.org/knowledge-center/know-your-world-facts-about-hunger-poverty/" target="_blank" rel="nofollow noopener noreferrer">Half of the world’s hungry</a> are farming families, and Pula strives to reach those most in need with security and stability.
Venture Lab is excited to be supporting Pula as they take on one of the world’s most significant challenges.
Have you read?

<a href="https://cfi-blog.org/2018/01/22/7-fintech-trends-to-watch-in-2018/">7 Fintech Trends to Watch</a>

<a href="https://cfi-blog.org/2018/02/27/the-radical-reinvention-of-inclusive-insurance/">The Radical Reinvention of Inclusive Insurance</a>

<a href="https://cfi-blog.org/2017/08/28/catalyst-fund-lessons-on-getting-early-stage-fintech-startups-investment-ready/">Cataylst Fund: Lessons on Getting Early-Stage Fintech Startups Investment-Ready</a>

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In a Changing Climate, Technology Provides a Lifeline for Farmers

Sub-Saharan Africa

Financial Service Providers

Fintechs

Index Insurance

Insurance

Smallholder Farmers

Underserved Groups

Blog Post

&gt; Posted by Center Staff

<a href="http://newsfeed.financialinclusion2020.org/"><img class="aligncenter wp-image-18949" style="border: 1px solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/08/8-10-2015-e-zine.png" alt="" width="615" height="330" /></a>

The latest edition of the <a href="http://newsfeed.financialinclusion2020.org/">Financial Inclusion 2020 News Feed,</a> our weekly online magazine sharing the big news in banking the unbanked, is now available. Among the stories in this week’s edition are the release of a New America Foundation report on account dormancy in youth savings, Yemen exploring mobile banking to combat the hardships of war, and Cambodia launching its first agricultural insurance programs. Here are a few more details:
<ul>
 	<li>The New America report considers how to understand the challenge of youth account dormancy in large-scale account-based initiatives and policy efforts, describing the range of issues related to account engagement from the perspectives of financial institutions, policymakers, and account-holders.</li>
 	<li>Yemen, following its central bank passing regulation on e-money and mobile money in December, is looking to the development of digital finance to cover critical services during wartime, as 30 to 40 percent of bank branches are closed.</li>
 	<li>The Cambodian Center for Study and Development in Agriculture (CEDAC) has launched the country's first agricultural insurance programs, in the form of pilots for the next year and a half, protecting rice farmers against loss from drought and floods.</li>
</ul>
For more information on these and other stories, read the latest issue of the FI2020 News Feed <a href="http://newsfeed.financialinclusion2020.org/">here</a>, and make sure to subscribe to the weekly online magazine by entering your email address in the right-hand menu so you can be notified when the latest issue comes out.

Have you come across a story or initiative you think we should cover? Email your ideas to Eric Zuehlke at <a href="mailto:ezuehlke@accion.org">ezuehlke@accion.org</a>.

Youth Savings, E-Money in Yemen, Agricultural Insurance – the Latest FI2020 News Feed

Financial Inclusion 2020

Cambodia

Yemen, Rep.

Zambia

Agent Banking

Mobile Banking

Youth

&gt; Posted by Jeffrey Riecke, Communications Associate, CFI

<a href="http://www.flickr.com/photos/50383637@N07/6673225753/"><img class="aligncenter wp-image-15175" style="border:0 solid #ffffff" src="http://centerforfinancialinclusionblog.files.wordpress.com/2014/06/6673225753_8fd491315f_b.jpg" alt="" width="575" height="431" /></a>As if we needed more motivation to support the expansion of microinsurance, the increase in extreme weather is highlighting the ability of the financial service to spur climate change adaptation.

Farming in developing countries is responsible for 70 percent of the world’s food supply, and farmers in developing countries are vulnerable to the effects of climate change. What will happen to the world’s food and to those making a living from small-scale agriculture when the frequency and intensity of extreme weather arising from climate change take stronger hold?

Smallholder farmers - about 2.5 billion people live in 500 million smallholder households in developing countries - <a href="http://www.agrifinfacility.org/segmentation-smallholder-households-meeting-range-financial-needs-agricultural-families" target="_blank">comprise the majority</a> of those living in absolute poverty. A lost harvest from lack of rain can trigger a cascade of seasons with compromised production and profits if farmers end the season without adequate funds to purchase seed and inputs. Microinsurance can provide a weather-linked safety net so that this cycle of poverty doesn’t have to happen. It can also elicit adaptive behavior change, like the purchase of drought-resistant seeds, that better positions farmers for resiliency during irregular rainfall seasons.

A recent <a href="http://api.ning.com/files/XewtWaR3V6ZqR5Km0aVUVKrIav3amJja0gNM1y5U5aJ0adjpdWIGLqgGtYmNPF0uUUVjpiI5MLBajivroEA6xgipHjCYK9ZP/Endeva_ChangingClimateChangingBehavior_2013.pdf">joint-paper from Endeva and Climate Analytics</a> highlights this potential for microinsurance in climate change risk mitigation and adaptation, sharing information about on-the-ground microinsurance schemes that have been successful, and the behavior change mechanisms that these services have employed.

In Kenya, the agricultural insurance product Kilimo Salama provides coverage for farmers’ seeds, fertilizer, and crops. The catch is that participating farmers will only be insured if they purchase drought-resistant seeds. To ease the burden of purchase, potential customers are given access to loans or can have the seed cost incorporated into their insurance premium price. The set-up of Kilimo Salama, along with offering general agricultural insurance, incentivizes productive investments that mitigate risk - which also makes the clients more insurable. If this service was not available, the chances of farmers investing in drought-resistant seeds would fall.

In the area of health insurance, some providers offer the benefit of lower premiums for subscribers who take part in healthy actions – for example, taking a yoga class. Similarly, Red Hairy Caterpillar Insurance, a product offered in India by People Mutuals to cover crop damage by caterpillars, provides discounted rates for farmers who plough their fields during the summer, a measure that decreases the likelihood of caterpillar occurrence. Evidence suggests that climate change is linked to the increased incidence and severity of crop-related pests. People Mutuals also offers free training and information services on climate risk mitigation and adaptation (for example, drought and water management) for subscribers, imparting knowledge and skills to farmers that they might not otherwise have, and reducing risk for all parties involved.

Another risk reduction mechanism involves providers accepting labor that contributes to climate change adaptation as payment for insurance premiums. The Rural Resilience Initiative known as Harita in Ethiopia allows subscribers in drought-prone areas to work on community-identified projects that build resilience to climate change, like irrigation improvement and soil management.

Many microinsurance services for farmers have payouts structured on indexes registering weather that is likely damaging for land and crops. As an altered take on this, policyholders may receive a payout via index readings prior to the extreme weather event, allowing farmers to prepare with risk management methods. This is the model of ENSO Business Interruption Index Insurance (EBIII) by La Positiva, a Peruvian insurance company. The product provides insurance for climate-related disasters related to the El Nino Southern Oscillation.

More research and experimentation on linking microinsurance with climate change risk mitigation and adaptation needs to be done, the paper advises. And on the whole, microinsurance services need to spread: in 2011, the total value of agricultural insurance premiums paid in developing countries was $5.2 billion, whereas globally the total was $23.5 billion.

Image credit: <a href="http://www.flickr.com/photos/50383637@N07/6673225753/" target="_blank">Bioversity International</a>

Have you read?

<a href="http://cfi-blog.org/2013/08/28/the-synergy-potential-of-financial-and-energy-inclusion/" target="_blank">The Synergy Potential of Financial and Energy Inclusion</a>

<a href="http://cfi-blog.org/2009/12/18/in-the-face-of-climate-change-adapt%E2%80%A6-and-mitigate/" target="_blank">In the Face of Climate Change, Adapt... and Mitigate!</a>

<a href="http://cfi-blog.org/2014/03/27/agriculture-microinsurance-in-africa-to-subsidize-or-not-to-subsidize/" target="_blank">Agriculture Microinsurance in Africa: To Subsidize or Not to Subsidize?</a>

Climate Change Adaptation for Smallholder Farmers

Amee Parbhoo

Rob Stevens

Jeffrey Riecke

Index Insurance

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In a Changing Climate, Technology Provides a Lifeline for Farmers

Youth Savings, E-Money in Yemen, Agricultural Insurance – the Latest FI2020 News Feed

Climate Change Adaptation for Smallholder Farmers