In Rwanda, all One Acre Fund (OAF) clients receive insurance as part of their service package of financing for farm inputs, seed and fertiliser, training on agricultural techniques and market facilitation. As Rwanda is a small country, bad weather can affect a large proportion of farmers at the same time. Insurance is therefore an important part of the package offered by OAF, because without it farmers who invest by purchasing training and inputs would be at the greatest risk and may not be able to pay back their loans. Additionally, farmers who have lost everything in the previous season are more hesitant or unable to invest money back into their farms the next season.
OAF, in partnership with the Rwandan Ministry of Agriculture and Animal Resources and the Syngenta Foundation, launched a weather-based index insurance trial in Rwanda in October 2012 after a smaller trial earlier in the year proved successful. With this system, if rainfall is either too much or too little, the farmers’ credit is reduced according to the severity of crop loss. If there is total crop loss, the farmers’ entire loan may be forgiven. A weather station was opened in partnership with the Ministry of Agriculture to measure the amount of rain during the cropping season. This information was then combined with data on how much rainfall key crops such as maize and beans need to survive. If the rain is either too much or too little for a decent harvest, a pay-out is awarded.
The insurance policy has already proved its value for those involved in the early trial, as rainfall levels were low in southern Rwanda during the January 2012-June 2012 growing season. As a result, OAF forgave a portion of affected farmers’ loans, allowing them to meet their repayment requirements and begin the September 2012-January 2013 season with a clean slate.