Case study 3: Agriculture & Climate Risk Enterprise (ACRE), East Africa

Farmers with phones. Credit, Kilimo Salama.

Farmers with phones. Credit, Kilimo Salama.

The Agriculture and Climate Risk Enterprise (ACRE), formerly known as Kalimo Salama, is a combined micro- and macro-insurance scheme. It is the largest index insurance programme in the developing world and in sub-Saharan Africa, offering products for both smallholder and large scale producers. The price of the policy premium depends on what kind of insurance the farmer is purchasing. For example, livestock insurance costs 3.5% of the value of each animal. Farmers are required to purchase an animal care package as a condition of the insurance, which ensures cattle are not lost to common and preventable diseases. A study in Zambia showed that this reduced cattle mortality rates from 22% to 1.6%.[1]

Cooperatives such as the Tanykina Dairy Cooperative in Kenya pre-finance the premiums then deduct the amount owed once the produce is delivered. This removes the upfront cost to the farmer and makes the cost more manageable. The programme bypasses expensive farm visits and instead measures loss through automated weather stations and mobile payments. These instruments dramatically reduce administrative costs and enables insurers to offer a more affordable premium policy for smallholders.[2] One study showed that insured farmers had 16% more earnings and invested 19% more compared to their uninsured neighbours. In 2012, around 177,780 farmers received $8.4 million in financing, in part due to ACRE’s index insurance products. Further, many would not have been able to access credit without an insurance policy to serve as collateral.[3]

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