Prospects for scaling up the contribution of index insurance to smallholder adaptation to climate risk

Climate change is expected to increase the risk from extreme climate events, such as drought, flooding and heat waves, in much of the developing world (IPCC 2012, 2014). Extreme events erode farmers’ livelihoods through loss of productive assets, while the uncertainty associated with climate variability is a disincentive to investing in agricultural innovation. The impacts of climate-related risk contribute to poverty traps that lock many farmers in climate-vulnerable livelihoods, impeding the kinds of transformation that smallholder agriculture needs in order to adapt to climate change. Index-based agricultural insurance is gaining increasing attention as a promising tool for adapting smallholder agriculture to climate risk. Although the promise is backed up by evidence in several contexts, several key challenges must be addressed to realize its potential at scale. New innovations and partnerships have great potential to overcome these challenges and elevate the role of index insurance in smallholder adaptation to a new level

Building Agricultural Resilience through Insurance in Nigeria

Nigeria can build a robust resilience framework to ensure that its agricultural sector is able to cope with the shocks and stresses of climate change through weather insurance. While there is already demand for index insurance, bundling insurance with production inputs and finance can make insurance more attractive to farmers, creating a mechanism for expanding insurance products and services that are more inclusive of smallholder farmers

Determinants for Use of Certified Maize Seed and the Relative Importance of Transaction Costs

The rising world prices for major tradable staples such as maize have been a concern for sub- Saharan countries such as Kenya which are maize deficit countries. Maize is a major staple food for over 80 percent of Kenya’s population. Kenya relies on maize for up to 40 percent of its dietary energy supply and is accordingly searching for ways to increase maize productivity. Maize productivity has been rising in the last decade manly as a result of the use of improved germplasm and fertilizer. However, the proportion of farmers using these technologies is low and the aggregate productivity in maize is low compared to other countries and its potential. Previous studies on input adoption have often assumed the existence of perfect supply and product markets, tending to ignore the important but significant role played by institutions as well as the role of transaction costs associated with market exchange. This study makes use of qualitative information from institutions and actors in seed input value chains as well as quantitative information collected from a sample of 150 farmers, in the Moist Transitional Maize Zones of Kenya. A two stage regression model was applied to analyze determinants of adoption and factors affecting degree of adoption of certified improved maize seed. The results show that as farmers adopt certified seeds, they incur higher transaction costs than non adopters, rural infrastructure, social capital such as membership in groups and trust play an important role in the decision of whether or not to use certified seed.Crop Production/Industries,

Evidence-Based Insurance Development for Nigeria’s Farmers: Briefing paper for Nigerian Federal Ministry of Agriculture and Rural Development (FMARD)-CCAFS Knowledge-Sharing Workshop, London, 27-28 January 2015

Agricultural insurance has been a feature in Nigeria for over two decades. The Federal Government has plans to expand agricultural insurance in the Country as part of several initiatives under the Agricultural Transformation Agenda (ATA). The Government wishes to extend crop insurance to those farmers benefiting from fertilizer subsidies under the Growth Enhancement Support Scheme (GES). The Government also wishes to implement weather index insurance (parametric insurance) in selected parts of the country susceptible droughts and floods. Experiences from index insurance initiatives worldwide provide important lessons for the development of crop index insurance in Nigeria. Experiences from India, Kenya, Rwanda, Ethiopia and Senegal suggest that there is demand for index insurance; that the bundling of insurance with key farm inputs e.g. improved seed and fertilizer, makes the insurance package more attractive to farmers; but that several challenges still to overcome, including data management, basis risk, logistical and client communication. CCAFS could play a role in working with the Federal Government to overcome some of these challenges

A roadmap for evidence-based insurance development for Nigeria’s farmers

In 2014, Nigeria’s Federal Ministry of Agriculture and Rural Development (FMARD) proposed a major expansion of agricultural insurance in the context of other reforms to the agricultural sector, and as part of the implementation of its National Agricultural Resilience Framework (NARF). This report is designed to inform development of inclusive insurance for Nigeria’s agriculture sector, and is offered as a contribution to the NARF. It is an outcome of a consultative process that began in September 2014 between FMARD and the CGIAR research program on Climate Change, Agriculture and Food Security (CCAFS). By overcoming the problems of moral hazard, adverse selection, and resulting high transaction costs and processing delays that have plagued indemnity-based agricultural insurance, index-based insurance makes it feasible to insure millions of smallholder farmers. Well-designed index insurance can achieve specific risk objectives such as protecting farmers’ livelihoods in the face of major climate shocks, and promoting farmers’ livelihoods by overcoming barriers to adoption of improved agricultural technologies and practices, and access to market opportunities. Reviews of index-based agricultural insurance initiatives have identified several success factors that are relevant to the situation in Nigeria. First, successful initiatives have been designed to unlock particular opportunities for farmers that were previously constrained by particular risks. Second, initiatives are most successful when they are driven by demand and responsive to farmer input. Third, successful initiatives have invested in the capacity of a range of local stakeholders. Fourth, investments in data systems, and in science-based index development, have helped address the challenges of data poverty and basis risk. Fifth, successful index insurance requires an enabling regulatory environment. Finally, successful initiatives involve multi-stakeholder partnerships, and often public-private partnerships. A strategy for expanding insurance for Nigeria’s smallholder farmers must address challenges that include: limited and asymmetric information; crowding out by post-disaster relief efforts; limited access to reinsurance markets; lack of insurance culture; and inadequate regulatory environments. The development of effective market-based agricultural insurance, requires government support in five key areas: data systems; awareness and capacity building; facilitating international risk pooling; “smart” subsidies; and an enabling policy environment. Three immediate priorities are identified: (a) creating a regulatory environment that makes it attractive for insurance companies to enter the market; (b) developing a public-private partnership that incentivizes and supports companies to develop innovative products and services for the agriculture sector; and (c) progressively expand implementation through well-designed pilots, evaluation and learning processes. The organizations that have been involved or consulted in the process leading to this report offer relevant expertise

Scaling up agricultural adaptation through insurance: Bringing together insurance, big data and agricultural innovation

Our belief that index insurance holds significant potential to reduce climate risk for small-holder farmers through its protection and promotion roles, significantly improving the welfare of farm households, is why we are bringing together experts from across the insurance, agriculture and climate change sectors to find the best ways to scale-up index insurance schemes as a key climate change adaptation action. This background paper includes a short introduction to index-based agricultural insurance. The bulk of the paper (Section 3), however, focuses on the challenges and opportunities to scaling up agricultural adaptation through insurance. Based on a review of secondary literature, interviews with key informants and the authors’ experience, we highlight a number of issues that warrant concerted multi-stakeholder attention and action in order to realize the potential of index insurance as a key component of climate change adaptation

Building the adaptive capacity of institutions towards managing climate security: a social learning approach

The complex nature of climate-related security risks is widely recognized as embodying a collective action problem, thereby requiring a diverse set of actors to mitigate such risks. However, the exact makeup of actor coalitions and the mechanisms to integrate multi-sectoral approaches in programming solutions remain something to be explored under distinct governance systems. This article presents a practical methodological approach to overcome these challenges building upon social learning theory, to foster institutional innovation towards governance systems that are more responsive to climate-related security risks. Social learning is proposed as a governance mechanism to develop multi-stakeholder communities of practice that facilitate climate security-sensitive policies, strategies, and programmes. Outputs from an applied reflexive dialogue evidenced how such a coalition of actors can strengthen capacities to develop locally-owned and adaptive climate action interventions that consciously work to mitigate climate-related security risks

Mapping of beef, sheep and goat food systems in Nairobi — A framework for policy making and the identification of structural vulnerabilities and deficiencies

Nairobi is a large rapidly-growing city whose demand for beef, mutton and goat products is expected to double by 2030. The study aimed to map the Nairobi beef, sheep and goat systems structure and flows to identify deficiencies and vulnerabilities to shocks. Cross-sectional data were collected through focus group discussions and interviews with people operating in Nairobi ruminant livestock and meat markets and in the large processing companies. Qualitative and quantitative data were obtained about the type of people, animals, products and value adding activities in the chains, and their structural, spatial and temporal interactions. Mapping analysis was done in three different dimensions: people and product profiling (interactions of people and products), geographical (routes of animals and products) and temporal mapping (seasonal fluctuations). The results obtained were used to identify structural deficiencies and vulnerability factors in the system. Results for the beef food system showed that 44–55% of the city's beef supply flows through the ‘local terminal markets’, but that 54–64% of total supply is controlled by one ‘meat market’. Numerous informal chains were identified, with independent livestock and meat traders playing a pivotal role in the functionality of these systems, and where most activities are conducted with inefficient quality control and under scarce and inadequate infrastructure and organisation, generating wastage and potential food safety risks in low quality meat products. Geographical and temporal analysis showed the critical areas influencing the different markets, with larger markets increasing their market share in the low season. Large processing companies, partly integrated, operate with high quality infrastructures, but with up to 60% of their beef supply depending on similar routes as the informal markets. Only these companies were involved in value addition activities, reaching high-end markets, but also dominating the distribution of popular products, such as beef sausages, to middle and low-end market. For the small ruminant food system, 73% of the low season supply flows through a single large informal market, Kiamaiko, located in an urban informal settlement. No grading is done for these animals or the meat produced. Large companies were reported to export up to 90% of their products. Lack of traceability and control of animal production was a common feature in all chains. The mapping presented provides a framework for policy makers and institutions to understand and design improvement plans for the Nairobi ruminant food system. The structural deficiencies and vulnerabilities identified here indicate the areas of intervention needed