Case study: Reaping rewards and security
A failed harvest can mean extreme financial hardship, inability to purchase farm inputs for the following season, hunger, and sometimes the difference between life and death.
To protect against this, crop insurance not only provides a payout for poor farmers should there be drought, but with insurance they are able to access loans to purchase higher yield, drought-resistant seed and fertilizer.
Harry Kafakalunda is a smallholder farmer who lives about 40 miles north east of Lilongwe in Malawi. Although he is 67 years old, Harry cycles more than 15 miles from his home along the bumpy, potholed dirt tracks from his home village to attend a monthly Transformation meeting where local smallholder farmers receive both technical advice and basic financial and insurance education.
This education is provided free for all of the forty farmers in the group who have taken out weather index crop insurance, developed by MicroEnsure, together with small loans to purchase farm inputs through Opportunity International Bank of Malawi (OIBM). The insurance is a safety net for the farmers in case of drought, but it also enables them for the first time to access agricultural loans previously unavailable because of the high risks associated with small scale farming in an area susceptible to drought.
“Before I joined the scheme,” Harry commented, “I wasn’t able to access loans, and for me, farming wasn’t a profitable business. Now, every year I can see improvements in my farming because I am able to buy better farm inputs.”
Harry supports a wife and eleven children as well as three orphans who make up his extended family. “I also have 24 grandchildren,” he added with a wide smile. “From struggling to survive and support my family, I am now planting two hectares of maize as well as cash crops – two hectares of tobacco and half a hectare of ground nuts. I am also going to plant cabbage and onions as extra cash crops, and I’m looking forward to being able to introduce irrigation to extend the growing season. The benefits for me are a better living standard, better food, I have been able to build a better house, and I have bought an ox cart from last year’s earnings. This would not have been possible before.”
Research carried out by Opportunity’s Insurance partner MicroEnsure has shown that 300,000 smallholder farmers in Malawi alone could move away from poverty and the threat of hunger over the next five years by taking out weather-indexed crop insurance and gaining access to agricultural loans. Taking into account the farmers’ dependent families, the lives of perhaps some two million people would be positively impacted.
While microinsurance is not a panacea, it is a significant route to improving the lives of the rural poor who otherwise would slip back towards destitution whenever catastrophic weather conditions occur.