Agric insurance set to lift incomes

By Faridah Kulabako

Agriculture in Uganda continues to face a variety of uncertainties, ranging from commodity price fluctuations to unpredictable weather patterns, which are said to be holding back efforts to lift people out of poverty.

First, the long dry spell that cause withering of crops in most parts of the country and now the recent onset of heavy rains are taking a toll on farms.

In a country where agriculture insurance is regarded a luxury, farmers are set to record huge losses. Food prices are also expected to rise.

However, in a move to make agriculture more profitable to the farmers, Alliance Africa General Insurance has said it will introduce affordable agricultural insurance, which is expected to enable the sector realise some progress.

Launched in Uganda a year ago, the firm said it intends to replicate the model used in Tanzania In Tanzania, farmers access insurance through organised groups — Savings and Credit Co-operative Societies (SACCOS)covering their individual small farms collectively through a group.

Alliance Africa General Insurance Uganda’s managing director, Ananth Krishnan Kadyam, said selling insurance products to individual smallholder farmers is unrealistic and cannot deliver a big impact.

This is because agriculture insurance policies are too expensive.

He was speaking on the sidelines of the Alliance Africa General Insurance

Uganda’s first anniversary at Kampala Serena Hotel on Tuesday.

“The growth of SACCOS in Uganda presents huge opportunities for agriculture insurance because it offers the benefits of aggregation and we will exploit that to grow agriculture insurance here,” Kadyam said.

He noted that the firm will work closely with the Government through the Insurance Regulatory Authority (IRA) and development partners to offer affordable products.

Industry sources put the price of agriculture insurance in Uganda at between 2% and 15% of the sum insured, depending on acreage of the produce. This is deemed too expensive for farmers, the majority of whom are smallholders.

The IRA-Uganda chief executive officer, Ibrahim Kaddunabbi Lubega, said the regulatory body is engaging the Government and the development partners on agriculture insurance as a way of unlocking potential in the sector.

Although farming remains the most important economic activity in Uganda, employing over 80% of the working population, commercial banks and insurance firms have continued to shun the sector, regarding it as risky, owing to the vagaries of weather and unstable prices.

In Tanzania, Alliance Insurance works in partnership with the World Bank to offer affordable insurance products.

According to the World Bank, agriculture insurance is the only way through which farmers can mitigate the risks associated with extreme weather conditions, increase smallholder farmers’ access to loans and ensure income stability.

Munyaradzi Daka, a consultant with Kungula Insurance, said insurance, subsidies will boost the uptake of agriculture insurance and save farmers from huge losses suffered in case of disasters and price fluctuations.

“It is expensive for the smallholder farmers to access agricultural insurance; policies are expensive for most farmers. But if the Government subsidises, agriculture insurance packages will become affordable,” he said.

He further explained that effecting subsidies will save the Government a lo of money it has been spending on the disaster fund. Citing Brazil, India, China, Senegal, Malawi, which have agriculture insurance subsidies, Daka said subsidies are the most effective way of boosting the uptake of agriculture insurance and ensure food security.

Rewa S. Misra, the MasterCard Foundation senior programme manager for financial inclusion, recently said governments need to partner with insurance companies if agriculture insurance is to succeed in Africa.

Misra noted that agriculture insurance requires huge investments to build quality data on weather patterns, which cannot be undertaken by private companies singlehandedly.

“Millions of farmers are accessing agricultural insurance in South Asia, India and China because their governments have seen a policy case for their intervention,” she said during the MasterCard Foundation Financial Inclusion symposium in Cape Town.

“Without government interventions, African countries cannot achieve much as far as agriculture insurance is concerned,” Misra said.

She noted that while financing is key to facilitating agricultural growth, agriculture is facing a lot of risks emanating from climate change, which have contributed to defaulting, making banks reluctant to lend to agriculture.

In Uganda, less than 10% of total commercial bank credit went to the agriculture sector last year, according to Bank of Uganda.

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