Cheap maize insurance cover throws smallholder farmers lifeline against crop failure

A farmer uproots dry maize crop from a farm in Nyeri after they failed to mature due to erratic weather. PHOTO | JOSEPH KANYI
A farmer uproots dry maize crop from a farm in Nyeri, Kenya after they failed to mature due to erratic weather. PHOTO | JOSEPH KANYI 

As the impact of global warming becomes clear in Kenya, farmers are no longer certain of getting expected yields. Erratic rain patterns, outbreak of diseases and perennial drought have subjected farmers to huge losses.

Kenya is now betting on better-managed, better-fertilised crops covered for risks like flooding and droughts to boost food production.

On Saturday, the Agriculture ministry launched a 50 per cent subsidy on premiums in partnership with seven insurers to compensate maize and wheat farmers in the event of shortfalls in the expected yields.

A few years ago, insurance companies and banks launched covers for livestock and crops such as sugarcane, maize, wheat, barley, rice, tea, coffee, flowers and vegetables, but the uptake has been low.

Low literacy levels, high production costs, the complexity of weather-index-related insurance schemes has locked many, especially small-scale farmers from coverage.


The government is now betting on the subsidised insurance scheme to protect more from perennial crop losses.

Maize and wheat farmers with crop on less than a five-acre piece of land will be offered subsidised insurance cover should their expected yields fall by more than a fifth in a scheme offered by APA Insurance, Amaco, CIC, Heritage, Jubilee, Kenya Orient and UAP.

“This will encourage farmers to enrol for the insurance cover to protect them from losses caused by unpredictable weather patterns,” said Dr Johnson Irungu, the director of crops in the Agriculture ministry.

Fredrick Muhorela, a small-scale maize farmer in Trans-Nzoia, said: “This is the best thing to have happened in the agricultural sector.

“Over the years we have been making losses without any form of compensation for the farmers, making it difficult for us to invest back in the next season.”

The farmer added that the losses have always made them to scale down on the size of acreage under the crop due to a lack of enough funds, a move that has been detrimental to the national food security.

Under the subsided government scheme, a farmer with more than five acres of land will have an option to take cover for the extra acreage, but one would be required to pay the full premium for the extra acres above the subsidised level.

The cover caters for crops damaged by animals, insects, plagues, diseases and any other perils which may influence the yield quantity of the insured commodity.

Farmers are required to sign up for the cover ahead of the long rains planting season that starts next month and the second week of October for the short rains season.

The scheme is a seasonal cover and it starts when the season begins at the onset of rains and ends at the completion of the crop period when the produce is ready for harvesting.

APA Group chief executive Ashok Shah lauded the government for providing subsidies on the premiums, adding that the cover would safeguard farmers’ livelihoods that are often threatened by adverse climatic conditions.

“Smallholder farmers are the backbone of our agricultural production. However, in recent years, they have had to bear the huge risk that comes with effects of climate change,” Mr Shah said.

“The weather is no longer predictable and natural disasters have become more frequent, leading to huge crop losses. We aim to address this challenge to livelihoods, our bread basket and our economy,” he said.

UAP launched an agriculture and livestock insurance cover in 2007. The insurer’s flagship product — Kilimo Salama, is based on index insurance that leverages weather information.

Weather index insurance is based on historical rainfall data in given areas to aid assessment of payout based on drought or excessive rainfall that affects average crop yield.

Experts argues that one obstacle to the expansion of whether index insurance schemes is the complexity and unreliability of the data.

In 2014, UAP extended Kilimo Salama insurance to area yield basis. Farmers who take up this insurance receive a payout in case the actual average yield in an area is below a set threshold.

In early March 2016, UAP paid out Sh20 million to a group of Kenya Seed farmers who experienced lower than average maize crop yield.

“The support of the government to agriculture insurance is a big boost to both enhancing the lives of farmers and entrenching insurance in our rural areas,” said UAP managing director, general insurance James Wambugu.

Harvest history

Jubilee’s chief executive Patrick Tumbo said that with the insurance, farmers can now concentrate on production and not the effects of natural disasters.

“Agriculture dominates 24 per cent of Kenya’s economy therefore this product will be supporting the heart of our agricultural production.

“Smallholder farmers face vast challenges due to climate change, which is a risk that is uncertain. Jubilee Insurance is determined to help them live free of huge crop losses,” said Mr Tumbo.

APA will use Unit Area of Insurance which refers to a specific portion of territory within a county for which expected yields and production shortfalls are determined, and in which equal or similar geographical and climatic conditions apply to all producers of the insured crop.

Each farm is insured based on the conditions and harvest history of the Unit Area of Insurance where the farm falls.

For instance, APA pointed out that farmers in Ngata zone of Rongai constituency would pay a subsidised premium of Sh1,367 per acre compared to drier Solai where premiums have been set at Sh456 an acre.

A farmer will be required to still take good care of his crop as they will not be paid for losses that occur only in his farm.

“You will only be paid for losses that affect a majority of farmers within your unit area of insurance,” said APA.

At the end of each season, a specialist organisation hired by the State Department of Agriculture will be contracted to carry out crop cutting exercises, where the yield levels of randomly selected farms within a unit area of insurance will be determined.

The yield achieved in these farms will be used to determine the average yield achieved within a given unit. In case the harvest achieved is below the insured yield, then all farmers within that unit will be paid an equal amount per acre depending on the level of loss.

In 1970s, the government offered farmers a form of insurance that was known as Guaranteed Minimum Returns (GMR) but it did not work for long due to abuse by farmers, who would lie of having incurred a total crop failure in order to get money from the state.

The GMR ensured that farmers would earn something in the event of a total crop failure in order to enable them go back to farm in the next season.

The Kenya Farmers Association (KFA) welcomed the move by the State and the underwriters, noting that it comes at the right time when yields have become unpredictable in Kenya.

“This is the right step that both parties in the scheme have taken, it will go a long way in safeguarding farmers interests,” said Kipkor Menjo, a director with KFA.

Mr Menjo, however, noted that there should be a lot of caution in implementing the scheme in order to ensure that it is not abused by the farmers as it was the case with GMR.

“A proper mechanism should be put in place to ensure that false claims are not compensated in order to avert insurance firms from making losses, hence leading to the closure of the scheme,” he said.

Kenya is a maize-deficit country and relies on cross-border business to bridge the 20 million bags gap every year. The country relies on rain-fed agriculture for crop production with only half a million acres under irrigation schemes.

The emergence of maize lethal necrosis a couple of years ago saw farmers incur huge losses, especially in the South Rift where the disease was first spotted.

The disease affects maize leaves, making them to wilt at a critical stage when the crop has just tussled, stagnating the formation of the cobs. In 2014, maize worth Sh4.7 million went to waste while in 2013 the disease affected 26,000 hectares valued at Sh2 billion.