Kilimo Salama, a Kenyan microinsurance partnership between Syngenta Foundation for Sustainable Agriculture of Switzerland, UAP Insurance of Kenya and Kenyan mobile-phone service provider Safaricom, has made its first payout to farmers in the town of Embu as a result of low rainfall levels. When Siakago Rural Technology School registered rainfall totals for the current season that were slightly below average, Kilimo Salama calculated a 15 percent decrease in yield, triggering a payment to farmers of 15 percent of the insured value.
Through the Kilimo Salama program, farmers who plant a minimum of one acre are offered the opportunity to pay a 5-percent insurance premium on their purchases of seeds and fertilizer. The policy protects their investment with a benefit based on estimated losses incurred when insufficient or excess rains have been detected by a nearby weather station.
While the largest payout of KES 2,500 (USD 30) may not seem large, the effectiveness of the payout mechanism was demonstrated, according to Marco Ferroni, Executive Director of the Syngenta Foundation: “This is how the system is supposed to work, to compensate farmers for any harvests that fall below what they would expect. In this case, the projected losses, and thus the payouts, were fairly small. In seasons with less rain, the payout could be far greater.”
The insurance payments were issued via M-PESA, a mobile phone payment system from Safaricom.
About Kilimo Salama:
Kilimo Salama is a Kenyan microinsurance program resulting from a partnership between Syngenta Foundation for Sustainable Agriculture of Switzerland, UAP Insurance of Kenya and Kenyan mobile-phone service provider Safaricom. The program offers farmers who plant a minimum of one acre the opportunity to pay a 5-percent insurance premium on their purchases of seeds and fertilizer. The policy protects their investment with a benefit based on estimated losses incurred when insufficient or excess rains have been detected by a nearby weather station.
About Syngenta Foundation for Sustainable Agriculture (SFSA):
The Syngenta Foundation for Sustainable Agriculture (SFSA) is a nonprofit organization based in Basel, Switzerland, whose mission is to create value for resource-poor small-scale farmers in developing countries through innovation in sustainable agriculture and the activation of value chains.
About UAP Insurance:
UAP Insurance Limited is an insurance provider based in Nairobi, Kenya, that operates in Kenya, Uganda, and Southern Sudan. It was formed in 1994 from the merger of Union Insurance and Provincial Insurance. The company’s products include commercial, life, travel, corporate medical and political violence and terrorism insurance. Additionally, along with Equity Bank, a commercial bank in Kenya, UAP Insurance has launched a program that incorporates satellite technology to provide herders with insurance for their livestock in the event of drought and subsequent starvation.
About M-PESA:
M-Pesa is a Kenyan cellphone-to-cellphone cash-transfer service. (The M is for “mobile” and pesa is “cash” in Swahili.) Launched in 2007 by Safaricom Limited, a Kenya-based cellphone service provider, M-PESA was developed by Vodafone Group Private Limited Corporation, a British multinational mobile network operator, as part of its strategy to reach the bottom of the pyramid with new goods and services.
By Matthew Fox, Research Assistant
Sources and Additional Resources:
Ratio Magazine: Kenya, Press Release, Rain ShortfallTriggers First Micro Drought Insurance Payouts, 22 September 2010: http://www.ratio-magazine.com/201009223654/Corporate-Press-Releases/Kenya-Press-Releases-Rain-Shortfall-Triggers-First-Micro-Drought-Insurance-Payouts.html
MicroCapital Universe: Kilimo Salama: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Kilimo+Salama
MicroCapital Universe: Syngenta Foundation for Sustainable Agriculture (SFSA): https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Syngenta+Foundation+for+Sustainable+Agriculture+(SFSA)
MicroCapital Universe: UAP Insurance: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=UAP+Insurance+Limited
MicroCapital Universe: M-PESA: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=M-Pesa
Browse the MicroCapital Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/tiki-index.php
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