Kenya Spotlight: Microinsurance for Every Farmer
In sub-Saharan Africa, only 3% of the 48 million smallholder farmers are engaged in agriculture. insurance. They own one acre of land and earn about $1.40 per person per day. small farmer. Smallholders often own a mix of cash crops and subsistence or non-commercial farming. And compared to large-scale industrial farms, they lack financial and technical resources. As extreme weather events become more frequent due to climate change, floods and droughts could plunge farmers into a cycle of poverty without protection through crop insurance.
Here is an update from an Ethereum Foundation Fellow. Benson Njuguna.
Benson is on a mission to improve humanity from an economic perspective through innovative ideas powered by technology. He is a business transformation expert. acres africa, a microinsurance service provider based in Kenya. For more information about Ethereum Foundation Fellowship Program, Read this blog post.
Farmers’ Obstacles: Trust and Affordability
Companies like ACRE Africa have been supporting farmers by providing risk management solutions and agricultural insurance products that address the precarious and uncertain livelihoods they face. One challenge in this sector is that farmers have negative preconceptions about insurance providers due to a history of late or missed payments. Farmers are not used to receiving important information related to their policies. Even simple information is provided, such as confirmation that you will be compensated for any losses incurred.
At ACRE Africa, a typical small-scale farmer with a half-acre plot pays about USD. 50 is enough to cover farm inputs such as seeds and fertilizers.
For the insurance industry, these low premiums mean you need scale to break even, and even more scale to generate profits. Reducing costs through digitization and automation is important not only for the commercial viability of the insurance industry, but also for farmers to be able to afford premiums.
Problem: Outdated crop insurance payment system
The life of every farmer consists of two seasons in Kenya and the region: the long rainy season and the short rainy season. The long rainy season begins in April and ends in July, while the short rainy season begins in October and ends in December. For the first cycle of the long rainy season in April, farmers are starting to take out insurance. To get started, you’ll need to fill out a variety of forms. Once forms are completed and insurance policies are purchased, ACRE Africa monitors risks and circumstances until the end of the season. This means that if an extreme weather event occurs during the period that the farmer has insured, the insurance money will only be paid out after the next season has already started. But without insurance, farmers would have suffered financial losses and had difficulty continuing farming until the next season.
Solution: ACRE’s BIMA PIMA
A farmer in Embu County, Kenya, activates his insurance using a scratch card included in a bag of seeds he purchased. (Thanks to Acre Africa for the photos)
BIMA PIMA product, which literally means small installment insurance, is one of ACRE Africa’s latest insurance solutions. It was implemented in cooperation with . etherHis team developed a decentralized insurance platform on Ethereum.
Farmers seeking BIMA PIMA coverage first purchase seeds for that season from cooperative agriculture suppliers. Each bag of seeds includes a scratch card with a unique registration code. In the pilot project, the basic insurance price was included in the seed price, but farmers can also purchase additional insurance through the mobile payment network (M-PESA).
When planting seeds, farmers use SMS/USSD to activate their insurance policy. During USSD activation, the location and phone number along with all other relevant details obtained from the registration code (e.g. crop type and amount covered) are passed to the policy smart contract. xDai Chain; This process is called triangulation and results in the automatic creation of new policies. The farmer immediately receives a text message notifying him that the policy has been activated.
Alternative systems monitor and compare actual and historical weather data to trigger claim approval. Here, payments are not based on human evaluations, but rather on predefined “windows” or stages of the entire farming season (e.g. germination, vegetation, flowering, excessive rain). As long as the weather and climate data collected meets the criteria agreed upon in the policy, the claim will be approved. Farmers then receive payments for the ongoing season and do not have to wait for the season to end as before. After signing up for insurance, farmers will receive an SMS and can check their insurance subscription status through their mobile devices.
Our goal is to earn the trust of every farmer by providing more relevant information, faster payouts, lower insurance product costs, and an audit trail for accountability.
First payment made via blockchain
Earlier this year, we made our first payment to farmer Samuel for insuring his corn seeds!
As of today there have been 511 mid-season payouts, totaling KES 75,295 ($2,766) was created.
Next Obstacles and Steps
This new system solves existing problems and improves on the current system in Kenya (and soon Tanzania and Zambia), but it is not without its problems. There is still a long way to go before a fully ‘decentralized’ insurance solution can be implemented. For example, while payments are technically possible, they are not yet fully automated. One of the key challenges is improving claim approval processing times. Like previous payment systems, claims sit on someone’s desk waiting for approval. Likewise, parties external to the project (e.g. insurers, reinsurers supporting claims processing, regulators) may still have their own stand-alone systems and require manual approvals, creating bottlenecks. process. We will continue to share policy-related information with all stakeholders. By accessing one system directly through a custom dashboard, we envision each stakeholder having access to one source of truth with a complete audit trail.
I hope that our BIMA PIMA insurance product can become a successful model to restore much-needed trust between farmers and insurance providers. I majored in computer science to help my community, and I realized at a young age that a country like Kenya needed technology to participate in the global marketplace. I’m excited to be a part of it and work for a future where millions of family farmers and billions of people in developing countries experience the beginnings of decentralization.
We hope you will continue to stay in touch. Fellowship ProgramWe welcome you to contact us if you would like to send us an email at: fellowship@ethereum.org. finally connected benson twitterOr contact us Connect with other fellows onlineOr learn more about the program.
