Zambian Farmer Lameck Sibukale showcasing his newly acquired ox, which he bought using earnings from a savings group. Credit: Friday Phiri/IPS

By Friday Phiri
LUSAKA, Zambia, Feb 14 2018 (IPS)

In the past, Lameck Sibukale only knew savings in the form of rearing chickens, goats and more importantly, cattle—a long cherished cultural heritage of the Tonga-speaking people of southern Zambia.

But thanks to a village savings scheme, the 78-year-old from Nachibanga village in Pemba district is now part of this growing financial inclusion crusade, bringing some fresh air to the functionality of the village economy.

“How I wish I was introduced to this concept earlier,” Sibukale told IPS. “This is a fantastic idea for us villagers who are far from formal banks, especially at a time like now when we need to save in case of crop failure, which has become common as a result of poor rainfall.”

Saving just over 200 dollars, Sibukale earned over 500 dollars from a portfolio of 2,100 dollars, which the 25-member group saved in eight months.

Using the farmers’ club concept, up to 25 members come together and form a solidarity group. The group meets on either a weekly, bi-weekly or monthly basis to save (buying shares at a stipulated price) based on their financial capabilities. The money is banked in a box whose keys are kept by two or three people for purposes of transparency. For financial sustainability, members are encouraged to borrow and pay back at an agreed minimal interest rate.

While there are several organisations championing savings for the majority unbanked rural population, Sibukale and his group are part of the World Food Programme (WFP)’s R4 rural resilience initiative.

Integrated solutions for emerging climate complications

One African proverb states: “If the rhythm is changing, so must the dance steps,” implying the need to develop new strategies to deal with emerging complex challenges such as climate change, which is compromising food, nutrition and income security—three key elements at the core of Sustainable Development Goals (SDGs) 1 and 2, aimed at ending poverty and hunger.

Therefore, as climate change is already complicating global food systems, development actors are also looking to integrated approaches to sustain productivity and production especially for the over 500 million smallholder farmers who produce much of the world’s food.

For WFP, ending hunger will not be possible without increasing smallholder farmers’ productivity. Thus, according to Jennifer Bitonde, WFP Zambia Director, “R4 is one of the pro-smallholder farmer approaches adopted where food assistance is defined not as old-style food aid handouts, but rather as a comprehensive range of instruments, activities, and platforms that together empower vulnerable and food insecure people and communities to access nutritious food.”

In support of national efforts to boost productivity and strengthen farmers’ food and income security amidst climate shocks, R4 deploys a set of four risk management strategies integrated through the project, which combines risk reduction (improved resource management), risk transfer (insurance), prudent risk taking (microcredit), and risk reserves (savings).

According to Allan Mulando, head of Disaster Risk Management and Vulnerability Assessment at WFP Zambia, the idea is to support farmers with several layers of protection across the value chain starting from production up to market access.

“In addition to conservation agriculture, insurance and microcredit, savings groups are specifically put in place to pool together financial resources which act as a buffer against short term needs, especially in times of shocks such as droughts and floods which usually lead to crop failure, ultimately affecting the normal livelihood pattern of the people,” explains Mulando.

And this is exactly what happened to farmer Sibukale. Last season, he lost one of his oxen, which negatively affected his tillage activities through reduced animal draft power. “I am happy that I joined this group where I’ve earned enough to replace it,” he said, proudly pointing at his newly acquired ox.

Supporting improved productivity

Whereas conservation agriculture and weather insurance are two layers of protection to support improved productivity, Sibukale believes savings are an added incentive.

He told IPS how he managed to pay for his children’s school fees, bought farming implements and inputs (fertilizer, seed and a ripper), helping him to increase the area under conservation agriculture, an exercise he says “would not have been possible without the money I earned from the savings group.”

And Milimo Haluma, a member of Silekwa savings group of Sikwale village, testifies to improved productivity. Haluma says before now, he found it difficult to buy inputs for himself.

“But now, with savings, I am able to purchase inputs on time,” Haluma said. “Due to timely input purchase, my productivity has improved. Last season, I was able to produce 3.75 tons of maize on the same size of land where I’ve been producing an average of 1.5 tons in the past seasons.”

Haluma, whose savings group is looking for external financial support to grow their portfolio, adds that with the incentive of weather insurance, farmers are finding it easy to save the little they earn. “Insurance is providing us a peace of mind to buy shares in our savings groups for we know that we are covered in case of crop failure resulting from poor rainfall,” he says.

Global support for up scaling financial services

Based on such positive strides, weather insurance and other related financial services for farmers’ adaptation to climate change have become topical issues at the highest global decision making levels. For instance, at COP 23, a global partnership to provide more financial protection against climate risks—‘InsuResilience’ moved into higher ambition phase.

The Initiative, which was launched in 2015 by the G7 group of nations under the German Presidency, aims at providing insurance to 400 more million poor and vulnerable people by 2020, and increase the resilience of developing countries against the impacts of climate change and natural disasters. It brings together G20 and V20 nations—the most vulnerable nations including Island states.

“The Global Partnership is a practical response to the needs of those who suffer loss because of climate change,” said the COP23 President and Fijian Prime Minister Frank Bainimarama.

Meanwhile, Thomas Silberhorn, German’s Parliamentary State Secretary to the Federal Minister for Economic Cooperation and Development, announced support for the new global partnership of 125 million dollars as part of the launch.

This follows the £30 million commitment made by the UK Government in July 2017, via its Centre for Global Disaster Protection. The initiative supports data and risk analysis, technical assistance and capacity building according to countries’ needs and priorities in terms of concrete risk finance and insurance solutions.

Commenting on the initiative, Patricia Espinosa, Executive Secretary of the UN Climate Change, said: “This new and higher ambition initiative represents one, shinning, example of what can be delivered when progressive governments, civil society and the private sector join hands with creativity and determination to provide solutions.”

The most recent example of support was in September 2017, when more than 55 million dollars was paid out to ten Caribbean countries within just 14 days after hurricanes Irma and Maria had wreaked disaster on the islands.

In Zambia, InsuResilience supports the NWK Agri-Services  cotton company, which offers direct weather and life insurance to small contract farmers. In 2015, some 52,000 farmers decided to buy insurance. Following a major drought in 2016, more than 23,000 farmers received payments.

And based on lessons from the R4 model which WFP has been piloting in Zambia since 2014, the Zambian government has this farming season incorporated weather insurance in its Farmer Input Support Programme (FISP) E-voucher programme, which has also allocated 20 percent for legume inputs aimed at encouraging crop diversification, an inbuilt resilience measure promoting improved soil fertility and income for farmers.

“We are also saying let us support the farmers on the e-voucher to grow more than maize,” said Dora Siliya, Minister of Agriculture. “So we as government give 170 dollars, while the farmer makes a contribution of 40 dollars. And for the first time this year, from this money, 10 dollars is going to be Weather Index Insurance.”

Abshy Nchimunya of Kayokela farmers club in Pemba district, Southern Zambia. Credit: Friday Phiri/IPS

By Friday Phiri
PEMBA, Zambia, Jun 29 2017 (IPS)

Frequent extreme weather and climate shifts pose a challenge to already vulnerable groups such as smallholder farmers in the developing world. Between 2004 and 2014, farmers are said to have endured the brunt of the 100-billion-dollar cost of climate-related disasters.

With traditional insurance proving costly, especially for smallholders residing in typical rural areas, the alternative approach – weather index-based insurance, which links pay-outs to events triggered by extreme weather – is increasingly becoming popular.R4’s integrated approach to risk reduction has somehow changed the dominant monoculture mindset of more than 2,000 farmers.

In Zambia, the World Food Programme (WFP) has been piloting such an intervention for the past two years in Pemba district of Southern Province. Premised on improving credit uptake and savings – two key enablers for smallholder agricultural growth – the insurance product targets farmers who have taken the initiative of engaging in climate smart agricultural practices (Conservation Agriculture).

Dubbed R4—Rural Resilience Initiative, the project takes a holistic approach to managing risk by integrating improved natural resource management (disaster risk reduction), credit (prudent risk taking), insurance (risk transfer), and savings (risk reserves).

But to what extent has the project helped smallholders? Abshy Nchimunya of Kayokela Farmers Club thinks to a large extent. While there has not been any pay-out in the two-year pilot project cycle, the 34-year-old believes the mere fact of being under insurance cover has been enough incentive for farmers’ resilience to climate shocks.

“I want to thank DAPP and its collaborating partners for initiating a programme like this which has opened my eyes to begin crop diversification so as to improve food security in my household,” says Nchimunya. “Besides this, the opportunity of accessing inputs on time through micro finance made me plant early and a large portion (2.5ha) which has not happened in my farming practices in a long time.”

Over the years, Nchimunya, just like many other farmers in his area, had always grown maize as a major crop. But when the project came, especially with insurance cover as a reward for conservation farming practices, it became an incentive for farmers to diversify into other crops such as cowpea and beans.

And 29-year-old Choobwe Meldah of Sinamanjolo village of the Ndondi Agriculture Camp thinks the project’s emphasis on diversification has uplifted the female voices in male-dominated households where legumes are usually considered female crops with little or no importance attached.

“Over the years, we have been conditioned and made to believe that maize is the best crop with a few legumes grown within the main field just for home consumption, and mainly cultivated by us women,” says Choobwe.

Since R4 however, “extension services have improved; coupled with timely weather information provision from fellow farmers in charge of project rain gauge stations, we have confidence to grow other crops and now treat farming as a business.”

By providing key services that are generally hard to access – financing for inputs, reliable weather information, a profitable market and simple saving schemes – R4’s integrated approach to risk reduction has somehow changed the dominant monoculture mindset of more than 2,000 farmers.

“So far, the project has shown a lot of impact—at least 60 to 70 percent of farmers are practicing conservation agriculture; all these farmers are accessing insurance, micro-credit, and we have taken it as a matter of principle to ensure that they all belong to small village saving groups,” explains Nervous Nsansaula of Development Aid from People to People (DAPP), a lead implementing Agency of R4.

As the pilot project ends this year, a four-year expansion project is on the horizon to cover the other four districts of Southern Province. “With a lot of success stories recorded, the plan is now to extend the project for four years and reach a target of 17, 000 smallholder farmers in four districts,” says Stanley Ndhlovu, R4 Project Manager at WFP Zambia office.

It is such success stories that have led agricultural stakeholders and development agencies to seek sustainable ways of up-scaling weather-based adaptation for farmers who largely rely on rainfall.

Hosted by the CGIAR research program on Climate Change, Agriculture and Food Security (CCAFS), the Technical Centre for Agricultural and Rural Cooperation (CTA) and the Syngenta Foundation for Sustainable Agriculture (SFSA), how to strengthen the momentum of weather-based adaptation to climate change was part of a fortnight long UNFCCC Subsidiary Body for Scientific and Technological Advice (SBSTA) talks in May 2017, in Bonn, Germany.

During the event, Bruce Campbell, Director, CGIAR Research Program on Climate Change, Agriculture and Food Security, echoed farmers’ reasoning that insurance opens numerous opportunities for farmers, aside the expected pay-outs for climate change losses.

“Through research, we have seen that formally insuring farmers against damage and loss caused by climate change is effective,” he said. “Insurance not only compensates smallholders to avoid catastrophic losses, it also allows them to invest and adapt, even when they don’t receive a pay-out.”

His plea is to ensure that all key players are engaged in order to reach more farmers, noting the importance of bringing the insurance industry together with climate change and agricultural researchers to develop truly global solutions.

Adding to the multiple benefits nexus, Michael Hailu, Director, Technical Centre for Agricultural and Rural Cooperation (CTA), shared the prospects of CTA’s flagship project—Making Southern African cereal and livestock farming climate resilient, which seeks to promote the scaling up of four specific proven climate-resistant solutions for cereal and livestock farmers: drought-tolerant seeds, improved climate information services, diversified options for livestock farmers, and innovative weather-based insurance for crops and livestock.

“In one of our flagship projects in Southern Africa alone, 200,000 maize and livestock farmers in Zimbabwe, Malawi and Zambia will have access to weather-based information services by 2019, which will help bolster the insurance market as one of the elements in a bundle of adaptation solutions,” said Hailu, adding that such innovations could pave the way for a proper scale-up.

Working in partnership with the Southern African Confederation of Agricultural Unions (SACAU), the project focuses on a challenge that has critical importance for Southern Africa now and in the future. Climate change is affecting all sectors of the economy in the region, but especially agriculture, which is generally rain-fed.

And Ishmael Sunga, CEO, SACAU, said: “The Southern African Confederation of Agricultural Unions (SACAU) is actively encouraging farmers to take up weather-based insurance because we believe it is an important incentive for investment as well as a safety net for climate-related losses.

“SACAU is currently working with the private sector to help expand an innovative weather-based insurance solution after successful pilots in Zimbabwe. We strongly believe that scaling up index-based insurance on a regional level can effectively share the burden of climate change while also breaking the cycle of low risk, low investment and low productivity.”

Private sector involvement in agricultural development is heralded as a new normal. But how much insulation is provided to poor farmers from a profit-driven industry is usually the question that arises. For example, the first year in the WFP Zambia rural resilience pilot project, the premium for insuring 500 farmers cost about 77,000 dollars.

However, amidst an El Nino-induced drought that affected not only Zambia but the entire Southern African region, some farmers in the project were riled that the index insurance did not trigger a pay-out. This was due to the fact that the satellite data showed that there was rainfall during the agreed window period.

But for farmers, understanding such scientific technicalities proved difficult, a point that Pemba District Commissioner, Reginald Mugoba, highlighted during one of the District Development Coordinating Committee (DDCC) meetings.

“I think it is important to be clear with farmers from the beginning,” he said. “New concepts are always difficult for our farmers to understand, especially if they involve scientific interpretations,” he added, pointing out the need to avoid ambiguity for such projects to be successful in rural communities.

By Jomo Kwame Sundaram
ROME, Dec 17 2015 (IPS)

With the increased frequency and severity of extreme weather events adversely affecting agricultural outputs and farmers’ incomes, commercial crop insurance has been touted as the solution for vulnerable farmers all over the world. Financial and farm interests have been promoting US crop insurance as the solution. It is instructive to consider lessons from the 2012 drought.

Jomo Kwame Sundaram. Credit: FAO

Unexpectedly low crop yields caused by the drought in much of the US significantly drove up global cereal prices by mid-year. By July 2012, more than 55 per cent of the US was in a state of moderate to extreme drought – the worst since 1956. US maize yield fell far short of the 166 bushels per acre that the US Department of Agriculture had projected in the spring. The USDA rated only 31 per cent of the crops “good” or “excellent”, while 38 per cent were rated “poor” or “very poor.”

When bad weather destroys part or all of their crop, those with a harvest-price clause in their insurance policies are compensated for most of their expected crop at the market price. When farmers can earn more from insurance at higher prices, they have an incentive to behave in ways that may raise prices even more, e.g. by delivering less.
Insurance payments for lost yields are based on current market prices, not some pre-agreed prices. Given the structure of these payoffs, it is not surprising that 85 per cent of all planted US farmland was insured in 2012, up from 75 per cent a decade ago, and only 25 per cent in 1988. Hence, many US maize farmers had their highest incomes ever despite the harvest failure!

By reducing the harvest, the drought drove up prices, boosting farmers’ incomes from insurance payments. If farmers with good insurance coverage make claims instead of harvesting, even less maize gets to market, raising prices – and insurance payments – further. When farmers planted in the spring, the maize price was less than 5 dollars a bushel.

Indeed, with highly subsidized crop insurance, if prices rise high enough, American farmers can earn far more from a failed harvest, than from a successful harvest. As insurance paid 80 per cent of current harvest prices, many farmers made more from insurance when prices rose above 6.25 dollars, than with a full harvest.

The supply shortfall pushed up maize prices to more than 8 dollar per bushel. As more land had been planted than ever before, many had expected a bumper crop, aggravating the low yield’s impact on prices. As the US is, by far, the world’s largest maize producer, and maize is the most popular animal feed, the poor harvest raised other food prices as well.

Nevertheless, this is very big—and very good—business for the insurance companies. Every year between 2000 and 2010, US crop insurers collected more in premiums than they paid out. But insurance companies also have little incentive to deter excessive payouts as the US government covers roughly three-fifths of premiums and reimburses private crop-insurance companies for administrative and operating costs exceeding a fifth of total premiums. Thus, the larger the nominal losses to insurers, the greater the share of payouts the government covers.

In 1989-2009, crop insurance cost US taxpayers 68.7 billion dollars, rising from 2 billion dollars in 2002 to 9 billion dollars in 2011, with more frequent and devastating extreme weather events. In 2011, when drought hit Texas and the US Southwest, total indemnified agricultural losses amounted to 10.8 billion dollars. But, as the government subsidized both premiums and re-insurance, private insurers still made a profit of 1.7 billion dollars. With the greater severity of the 2012 drought, the payout was much larger.

The federal government subsidy to crop insurance has since increased with the latest US farm bill. Yet, US policymakers have no reason to change things. Farm incomes account for a relatively small share of the US economy. In the run-up to national elections, powerful farm lobbies regularly call for even more federal protection. With candidates from both major parties vying for farm votes, neither side will discuss the perverse effects of US crop insurance or even its effect on the fiscal deficit – much less its impact on food prices and the world’s poor.

Instead, crop insurance is still touted as the best means to reduce farmer vulnerability, or even to combat poverty in developing countries. In Europe, the crop insurance lobby is calling for a “level playing field” by emulating US arrangements — by raising the level of support from the current 20 per cent to the US’s 70 per cent!

As such generous underwriting is allowed under WTO rules, and most developing countries cannot afford to subsidize crop insurance to the same extent, their farmers will consequently be at a further disadvantage. In any case, most poor farmers in developing countries are unlikely to be able to afford even the subsidized premiums offered by commercial insurance.

The “success” and popularity of US crop insurance is clearly due to high levels of government subsidy, beyond the means of most developing country governments.

While the risk-sharing that crop insurance offers is undoubtedly attractive, commercial insurance companies would not participate if they were really sharing risk. Surely, there are better options for protecting farmers — in the US and elsewhere.

(End)

Excerpt: