Blog / Ruud Grim / October 22, 2018
Agriculture is a major driver of African economies. In recent years, climate change is increasingly affecting crop production in Sub-Saharan Africa, negatively impacting farmers livelihoods and hampering economy growth. The G4AW SUM Africa project is addressing this challenge by using satellite-based weather data to create a low-cost insurance product for smallholders in Mali and Uganda. With this insurance, farmers have a greater chance to obtain the credit they need to increase crop production and improve their livelihoods.
How does it work?
Agricultural index insurance products are linked to an index, such as temperature, rainfall, crop yield or evapotranspiration, rather than actual loss. Daily information from (meteorological) satellites, provides timely, independent and continuous monitoring of climatic and drought conditions for crop growth. This information is used by insurance companies for risk assessment, insurance pricing, and for pay-out calculation. Because insurance companies no longer need to visit the farmer to assess their loss and determine payout, transaction costs are much lower.
Synergy between insurance and credit
It is difficult for African smallholders to get a loan if their business is not cash-flow positive. Potential investors also demand a proven, reliable and scalable business model, making it harder for smallholders to emerge from poverty. Joost van der Woerd, SUM Africa Project Coordinator, explains: “Low-income farmers in Africa don’t have access to traditional indemnity-based agricultural insurance, putting their livelihoods at stake. Weather index insurance makes a great investment for farmers, as it helps them to increase yield sustainably.” With insurance, farmers are more likely to get a loan, enabling them to invest in new technologies that could continuously boost crop production.
Since the programme started in 2014, SUM Africa has insured about 70,000 coffee farmers against weather-related losses in Uganda. It has proven more difficult to achieve the same level of uptake in Mali, due to lack of infrastructure and security issues. SUM Africa aims to enable 150,000 farmers in both countries to benefit from satellite-based index insurance by 2021.
Why zero hunger matters
The UN indicates that agriculture is the single largest employer in the world, providing livelihoods for 40 percent of today’s global population. As climate change intensifies, achieving food security will be even more difficult. Sum Africa was introduced to farmers through the Geodata for Agriculture and Water (G4AW) programme. It is one of 23 G4AW projects in 14 countries aiming to boost climate resilience of agricultural production systems. The G4AW programme is carried out by the Netherlands Space Office (NSO), and commissioned by the Dutch Ministry of Foreign Affairs.
Fighting hunger with space technology
While GEO’s Global Agricultural Monitoring Initiative (GEOGLAM) uses Earth observations to provide actionable and open information on crop conditions as a means to improve food security and reduce food price volatility, G4AW services use Copernicus satellites and meteorological data to provide end-user focused (B2C) solutions that target smallholder farmers. G4AW aims to support widespread adoption of such technologies for achieving food security. Fulfilling their ambition requires actors across the value chain to open up new markets and enable scalable solutions around G4AW–like services. Visit www.spaceoffice.nl/G4AW to learn more about this programme.
Blog post: How space technology is transforming Africa’s food system through low-cost insurance products for smallholders