Smallholder farmer support NGO One Acre Fund has obtained Sh118.6 million ($988,659) from the International Finance Corporation (IFC) for climate insurance.
IFC disclosures on the facility will be organised around the components of risk management, capacity support, and high-value insurance trial.
Kenya smallholder farmers are highly vulnerable to climate-related risks such as drought and floods amid limited access to risk financing and insurance solutions.
“This trial will seek to test the impact of different insurance coverage levels on farmer resilience, as well as establish the most ideal metrics to use in measuring farmer resilience to climate risk,” said the IFC.
One Acre Fund supplies financing and training to more than half a million farmers in Kenya to enable them grow their way out of hunger.
The organisation that also serves farmers in Rwanda, Burundi, Uganda, Tanzania, Zambia, Malawi, and Tanzania is piloting valuable commercial crops such as avocado, macadamia, and coffee to boost incomes beyond staples.
One Acre Fund's current insurance arrangement only covers 50 to 60 percent of the cost of inputs loaned to the farmers.
“The organisation would like to conduct research to estimate the level of coverage that would most contribute to higher farmer resilience — without over-insuring the farmer—, for instance, should insurance cover the full value or a certain percentage of the expected yield,” states IFC.
The firm would also conduct research on the most appropriate premium that farmers afford for the ideal coverage and the metrics that should be used to measure farmers’ improved resilience.
Insurance provides farm income stability by compensating the losses to the farmers in a timely and efficient manner. It is expected that by farmers using insurance as collateral, they can access finance, source inputs, and be more productive.
This will greatly contribute to food security, apart from also growing their income margins.