Agriculture Index Insurance: Kilimo Salama
Can cell phones beat drought? The Foundation’s insurance program helps smallholders deal with weather risks.
Around the world, millions of smallholders are facing the effects of climate change. Extreme or erratic rains, flood and drought threaten their livelihoods. Most of these farmers work five hectares or less, often in remote areas. In Kenya, the agricultural sector employs three-quarters of the working population. In a bad season, they can lose their entire harvest, and lack the money to buy quality seeds and other inputs for the next growing season. Kilimo Salama is an agricultural insurance product that helps farmers cope with climate change and devastating weather shocks.
The Kilimo Salama Model
Kilimo Salama means “safe farming” in Swahili
Insurance should be simple, affordable, and relevant to small farmers. Kilimo Salama insures farmers against drought and excess rain. Launched in 2008, it is now the largest agricultural insurance program in Africa. Kilimo Salama is the first such program worldwide to reach smallholders using mobile phone technology.
A farmer can try out insurance for as little as ten US cents, to insure a bag of seed costing $2. If there is a drought, for example, the farmer will receive a payout of two dollars, and can begin afresh at the next growing season.
Kilimo Salama currently insures over 70,000 farmers. Previously, few of them could afforded such cover because of the high costs. Traditional crop insurance relies on expensive farm visits to verify claims. Kilimo Salama does not visit the farms. The program is designed specifically for smallholders. It uses automated weather stations and mobile payments. These dramatically reduce administrative costs, enabling a premium price that millions of farmers can finally afford.
Our vision is for agricultural insurance to be as common on a farm as fertilizer
Kilimo Salama’s use of technology is the key to the microinsurance product’s affordability and the model’s scalability. Kilimo Salama’s clients are smallholders scattered throughout rural Africa. To reach them, the program partners with agricultural microcredit institutions and local agro-vets or stockists who sell farming inputs like seeds, fertilizer, and crop protection products.
An automated weather station installed in East Africa. The station collects and automatically transmits measurements to the Kilimo Salama cloud-based server every 15 minutes.
When a farmer purchases insurance, the microcredit officer or agro-vet registers the purchase by scanning a code using a specially-developed mobile phone application. The message goes to a cloud-based server that administers the policies. It then sends the farmer an automated SMS with his or her policy number.
Solar-powered weather stations collect the weather data. At the end of each growing season, they are automatically compared to an index based on historical weather data. If the season’s rainfall is 15% above or below the average, the insurance payout owed to client farmers is calculated and sent via automated mobile payment. There is no “claims” process.