Webinar Report - Enhancing Access to Index-Based Weather Insurance: A New Marketing Approach in Burkina Faso

27.06.2018, Global (online)

The Making Finance Work for Africa Partnership (MFW4A), Innovations for Poverty Action (IPA), Planet Guarantee, University of Kent and Oklahoma State University organized and launched a Webinar, entitled "Enhancing Access to Index-Based Weather Insurance: A New Marketing Approach in Burkina Faso", on 27 June 2018.

Based on the findings of studies conducted in Burkina Faso and Ghana by researchers from the University of Kent and Oklahoma State, the Webinar provided an overview of the state of index-based weather insurance in the West African region, and explored the challenges facing agriculture insurance uptake across the continent.

This session was moderated by Guy Menan, MFW4A Research and Knowledge Manager, and moderated by speakers including:

  • Arthur Sagot-Duvauroux, Policy and Project Development Coordinator, IPA Francophone West Africa
  • Sebastien Weber, Consulting and Partnerships Director, Planet Guarantee
  • Harounan Kazianga, Researcher, Oklahoma State University
  • Zaki Wahhaj, Researcher, University of Kent

The webinar began with a presentation by Innovations for Poverty Action (IPA) concerning the potential for profitability of agricultural investments in Ghana, specifically insurance products for farmers. Arthur Sagot-Duvauroux, the first speaker pointed out that the success of agricultural endeavour in Ghana is highly dependent on operational risks, such as climatic conditions and rainfall which can both affect income generation for farmers. Mr. Sagot-Duvauroux  also brought attention to the positive and significant effects which new technologies might have on investments (improved fertilizer, new agricultural inputs, an expanding working force, etc.), crop yields, and profits for farmers who benefit from such insurance products, instead of subsidies.

According to the IPA study, the main obstacles to agricultural investment are:

  • Lack of investment in fertilizers and hybrid seeds that can boost yields;
  • Limited access to credit for agricultural inputs acquisition; and
  • Risk aversion linked to agricultural underperformance after financial investment in agricultural inputs

Thus, the survey of hundreds of households showed that the potential risks to farmers’ activities are a much greater barrier than access to capital for agricultural investment in northern Ghana, which has traditionally been viewed as the principal barrier to entry. According to the study, it is also important for the first beneficiaries of agricultural insurance products to be communication and promotion relays in order to encourage wider adoption.

Thereafter, Sebastien Weber of Planet Guarantee presented the lessons learned from his organization’s interventions in West Africa, particularly in Burkina Faso. Regarding the specificities of weather-indexed insurance, he also indicated that it is a financial product better suited to the profile of farmers and the risks associated with them, compared to traditional insurance. Thus, the index can refer to a certain level of agricultural yield or climate-related events such as rain, drought or wind. The predictive capacity of these climatic and performance conditions is also enhanced by the use of meteorological and satellite data. Regarding Planet Guarantee activities in West Africa (including Mali, Burkina Faso, Côte d’Ivoire, and Senegal), Sebastien presented the scope (number of clients served, levels of investments, insurance premiums collected, and claims paid), as well as the different actors involved in distribution networks, including Microfinance Institutions (MFIs), NGOs, producers associations, insurance  and reinsurance companies, and agro-industrial sector players who consequently benefit from new business opportunities in this underexploited market.

In Burkina Faso, cereal and cotton crops benefited from an agricultural insurance program, and more than 29,285 farmers were covered, with the level of premiums collected amounting to 300,000 Euros and claims payment reaching 187,000 Euros (indicating a claims ratio of 66%). Moreover, on the basis of a study covering 20 villages in Burkina Faso, Sebastien also said that urban migrants with relatives in rural areas expressed significant demand for agricultural insurance products related to rainfall, while the insurance companies had the opportunity to optimize marketing and subscription process (timeline and costs) for these products. Finally, Mr. Weber advocated that new measures to develop agricultural insurance initiatives be developed and implemented, including:

- More research to better calibrate these products to the needs of targeted populations;
- Government support in the fields of financial education, regulation and tax incentives;
- Innovative marketing models, including a mobile money channel; and
- Inclusion of international diasporic communities in commercial targeting in order to increase the access to insurance products by rural peoples.

In order to better explore the potential of urban migrants to enhance access to agricultural insurance products for their relatives in rural areas, IPA and Planet Guarantee supported two researchers, Harounan Kazianga and Zaki Wahhaj. These researchers conducted a study in Burkina Faso - in rural areas and in the capital Ouagadougou - aimed at understanding the feasibility of such a marketing model, as well as the determinants of such a demand.

Vulnerability to climate shocks in Africa remains high, while the insurance penetration rate in Africa is low, causing farmers to rely on informal methods of insurance which are often ineffective. The main results of the study have demonstrated the cost-effectiveness and feasibility of marketing agricultural insurance products to urban migrants in Ouagadougou for the benefit of their relatives in rural areas. Thus, after a marketing window of three weeks, an adoption rate of 22% was recorded—however, this rate oscillated between 20-35% in rural areas, after years of supply to farmers. The costs per subscriber also dropped: From 10,000—25,000 F CFA1  for urban migrants, and 20,000—40,000 F CFA for rural farmers directly served. Ultimately, the study revealed the existence of strong links between urban migrants and their relatives in rural areas, as well as a significant demand for agricultural insurance products based on rainfall from urban migrants with relatives in rural area.

The final session of the Webinar was devoted to Questions & Answers. Participants raised questions about the different tools needed to provide agricultural insurance services, the gender issue in the design of this type of insurance products, the pricing method applied in agricultural insurance, the break-even point defined by Planet Guarantee in its West Africa programs, and how samples were set up in the IPA study in Ghana.

Regarding how Planet Guarantee break even, Sebastien Webber explained that the marginal costs remain important for the first beneficiaries, and that it was difficult for the institution to define a break-even point for each agricultural insurance product separately. As a result, Planet Guarantee pools and capitalizes on its programs at national and regional levels. However, the institution usually calculates its break-even point by considering a target of 50,000 customers per intervention country—i.e. 200,000 customers in the West African region (among the four targeted countries). With regard to gender issues, Sebastien also explained how the high level of female representation in these programs is strongly linked to the agricultural value-chain and the types of crops practiced, which included cotton and maize.

For more details on keynote presentations and on the exhaustive Q&A session, please download the webinar recording HERE.

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1 Euro = 656 F CFA