Weather Index Insurance Scales Up in Rwanda
The agricultural sector in Rwanda accounts for approximately 40% of GDP, employs up to 90% of the population, provides 70% of export revenues and meets 90% of national food needs. MicroEnsure’s Agricultural Consultancy Division is working with the IFC to strengthen the Rwandan agricultural sector by providing affordable weather index insurance that facilitates access to finance for smallholder farmers.
The majority of smallholder farmers farm an average of half a hectare of arable farm land. Whilst the high risk as a result of reliance on the weather has traditionally excluded them from access to agricultural finance, weather index insurance (WII) facilitates access to credit and provides a safety net against the effects of adverse weather. As a result, commercial banks, such as Kenya Commercial Bank, ventured into agricultural lending for the first time this season thanks to MicroEnsure’s weather index insurance reinsured by Swiss RE, an international reinsurer.
MicroEnsure is currently providing WII for 7,118 farmers who have taken agricultural loans from Kenya Commercial Bank (KCB) and another large commercial bank. MicroEnsure has held a number of weather index awareness workshops in collaboration with a number of microfinance institutions (MFIs) and credit cooperatives. Through the workshops, staff are able to learn the basic concepts of WII and how to use it as a tool to expand outreach, manage weather-induced default risk and improve the livelihoods of the clients they serve. As understanding and coverage increases, a greater number of financial institutions are looking to provide WII to their customers in the coming seasons.
Improving Weather Data Infrastructure
To scale up WII in Rwanda, there is a need to improve the quality and quantity of data from weather stations. Underwriters typically require 30 years of historical data to price contracts accurately. Where good-quality historical data exists, the underwriter is able to better understand the risk and lower premiums accordingly. In some areas, weather stations have data stretching back as far as the 1930s, however, in almost all cases there are gaps in the data. As new automatic weather stations are installed, there is a need to provide farmers with WII without waiting for each station to gather years of data. Working with resources from the University of Reading, MicroEnsure is able to create synthetic data that allows gaps to be filled and new stations to be brought into use more quickly.
MicroEnsure has recently received four automatic weather stations to help develop the weather station infrastructure in Rwanda. Installed in partnership with the Rwanda National Meteorological Service and the Ministry of Agriculture, the stations will be located near to existing manual stations, for example one will be located in Zaza in the Eastern Province. Supplied by LSI-SAT in Italy, a company engineer will assist local teams to install the stations and provide training for ongoing servicing and maintenance. These public-private partnerships represent a strong foundation for the scaling up of weather station infrastructure in the coming years.
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