Rose Goslinga: Crop insurance, an idea worth seeding


In Kenya, 1984 is known as the year of the cup, or the goro goro. The goro goro is a cup used to measure two kilograms of maize flower on the market, and the maize flower is used to make ugali, a polenta-like cake that is eaten
together with vegetables. Both the maize and the vegetables are grown on most Kenyan farms, which means that most families can feed themselves from their own farm. One goro goro can feed three meals for an average family, and in 1984, the whole harvest could fit in one goro goro. It was and still is one of the worst droughts in living memory. Now today, I insure farmers against droughts like those in the year of the cup, or to be more specific, I insure the rains. I come from a family of missionaries who built hospitals in Indonesia, and my father built a psychiatric hospital in Tanzania. This is me, age five, in front of that hospital. I don’t think they thought I’d grow up to sell insurance. (Laughter) So let me tell you how that happened. In 2008, I was working for the Ministry of Agriculture of Rwanda, and my boss had just been promoted to become the minister. She launched an ambitious plan to start a green revolution in her country, and before we knew it, we were importing tons of fertilizer and seed and telling farmers how to apply that fertilizer and plant. A couple of weeks later, the International Monetary Fund visited us, and asked my minister, “Minister, it’s great that you want to help farmers reach food security, but what if it doesn’t rain?” My minister answered proudly and somewhat defiantly, “I am going to pray for rain.” That ended the discussion. On the way back to the ministry in the car, she turned around to me and said, “Rose, you’ve always been interested in finance. Go find us some insurance.” It’s been six years since, and last year I was fortunate enough to be part of a team that insured over 185,000 farmers in Kenya and Rwanda against drought. They owned an average of half an acre and paid on average two Euros in premium. It’s microinsurance. Now, traditional insurance doesn’t work with two to three Euros of premium, because traditional insurance relies on farm visits. A farmer here in Germany would be visited for the start of the season, halfway through, and at the end, and again if there was a loss, to estimate the damages. For a small-scale farmer in the middle of Africa, the maths of doing those visits simply don’t add up. So instead, we rely on technology and data. This satellite measures whether there were clouds or not, because think about it: If there are clouds, then you might have some rain, but if there are no clouds, then it’s actually impossible for it to rain. These images show the onset of the rains this season in Kenya. You see that around March 6, the clouds move in and then disappear, and then around the March 11, the clouds really move in. That, and those clouds, were the onset of the rains this year. This satellite covers the whole of Africa and goes back as far as 1984, and that’s important, because if you know how many times a place has had a drought in the last 30 years, you can make a pretty good estimate what the chances are of drought in the future, and that means that you can put a price tag on the risk of drought. The data alone isn’t enough. We devise agronomic algorithms which tell us how much rainfall
a crop needs and when. For example, for maize at planting, you need to have two days of rain for farmers to plant, and then it needs to rain once every two weeks for the crop to properly germinate. After that, you need rain every three weeks for the crop to form its leaves, whereas at flowering, you
need it to rain more frequently, about once every 10 days
for the crop to form its cob. At the end of the season, you actually don’t want it to rain, because rains then can damage the crop. Devising such a cover is difficult, but it turned out the real challenge was selling insurance. We set ourselves a modest target of 500 farmers insured after our first season. After a couple of months’ intense marketing, we had signed up the grand total of 185 farmers. I was disappointed and confounded. Everybody kept telling me that farmers wanted insurance, but our prime customers simply weren’t buying. They were waiting to see what would happen, didn’t trust insurance companies, or thought, “I’ve managed for so many years. Why would I buy insurance now?” Now many of you know microcredit, the method of providing small loans to poor people pioneered by Muhammad Yunus, who won the Nobel Peace Prize for his work with the Grameen Bank. Turns out, selling microcredit isn’t the same as selling insurance. For credit, a farmer needs
to earn the trust of a bank, and if it succeeds, the bank will advance him money. That’s an attractive proposition. For insurance, the farmer needs to trust the insurance company, and needs to advance the insurance company money. It’s a very different value proposition. And so the uptick of insurance has been slow, with so far only 4.4 percent of Africans taking up insurance in 2012, and half of that number is in one country, South Africa. We tried for some years selling insurance directly to farmers, with very high marketing cost and very limited success. Then we realized that there were many organizations working with farmers: seed companies, microfinance institutions, mobile phone companies, government agencies. They were all providing loans to farmers, and often, just before they’d finalize the loan, the farmer would say, “But what if it doesn’t rain? How do you expect me to repay my loan?” Many of these organizations were taking on the risk themselves, simply hoping that that year, the worst wouldn’t happen. Most of the organizations, however, were limiting their growth in agriculture. They couldn’t take on this kind of risk. These organizations became our customers, and when combining credit and insurance, interesting things can happen. Let me tell you one more story. At the start of February 2012 in western Kenya, the rains started, and they started early, and when rains start early, farmers are encouraged, because it usually means that
the season is going to be good. So they took out loans and planted. For the next three weeks, there wasn’t a single drop of rain, and the crops that had germinated so well shriveled and died. We’d insured the loans of a microfinance institution that had provided those loans to about 6,000 farmers in that area, and we called them up and said, “Look, we know about the drought. We’ve got you. We’ll give you 200,000 Euros
at the end of the season.” They said, “Wow, that’s great, but that’ll be late. Could you give us the money now? Then these farmers can still replant and can get a harvest this season.” So we convinced our insurance partners, and later that April, these farmers replanted. We took the idea of replanting to a seed company and convinced them to price the cost of insurance into every bag of seed, and in every bag, we packed a card that had a number on it, and when the farmers would open the card, they’d text in that number, and that number would actually help us to locate the farmer and allocate them to a satellite pixel. A satellite would then measure the rainfall for the next three weeks, and if it didn’t rain, we’d replace their seed. One of the first — (Applause) — Hold on, I’m not there! One of the first beneficiaries
of this replanting guarantee was Bosco Mwinyi. We visited his farm later that August, and I wish I could show you the smile on his face when he showed us his harvest, because it warmed my heart and it made me realize why selling insurance can be a good thing. But you know, he insisted that we get his whole harvest in the picture, so we had to zoom out a lot. Insurance secured his harvest that season, and I believe that today, we have all the tools to enable African farmers to take control of their own destiny. No more years of the cup. Instead, I am looking forward to, at least somehow, the year of the insurance, or the year of the great harvest. Thank you. (Applause)

32 comments

"Across sub-Saharan Africa, small farmers are the bedrock of national and regional economies." sigh…..

if this is so obvious then how about having a TED talk about how the US-EU is deliberately dumbing subsidized food & dairy products into african markets, rendering these farmers worthless, unable to feed their families or to generate an income.

if history has shown us anything is that+ anything involves the west & "help" "well intentions" "credit" should be obvious to africans by now that its the equivalent to modern day smallpox blankets.

and did she say IMF? 

anything they are involved in turns to disaster, they more than any other agency killed more africans than hitler killed europeans, they should be banned form the continent.

Ms. Rose Goslinga and her team's idea of creating innovative insurance solution to the Africa is awesome  Likewise, region-specific solutions to be found so many of our problems. Highly recommended to everyone.

But what is the cost of this insurance? Another question is: Why can't other regions share their crops if there's a drought in some areas? Why is it necessary to use an economic-based solution to solve a social problem?

It's the same as how we attempt to solve social problems in the west with only economic solutions. i.e. People are drinking too much alcohol and fighting in the streets. The solution is to increase the price of alcohol. It doesn't solve the root cause of the problem, because drinking too much alcohol isn't the cause – it is a symptom of an underlying social problem.

Giving insurance to farmers does not prevent the problem of crop failure and never will do. All it does is exchange money for failed crops so they can buy food from other places. What if there are droughts everywhere? Can they eat money? The underlying problem has NOT been solved and "could" get worse, as farmers start to rely solely on economic solutions to real world problems. The solution is in finding new ways of growing crops so that they DON'T fail in the first place. Insurance would not be necessary then.

Hope my points have gotten across clearly. Not very good at explaining things.

I'm sorry, but after all the terrible things that insurance is inflicting on societies wherever it spreads, why would we want to spread it into poor African farmer communities? I was hoping for a story showing an alternative to insurance, not for another beginning of insurance-inflicted horror. This is bad news for everyone.

What about in America? Why does the US subsidize farms? Why do we pay people to not grow? Why isn't it just a free economy?

What African agriculture really needs is an increase in access to domestic markets via improvements in infrastructure and removal of trade barriers between African states, protection against foreign markets particularly food aid which massively devalues food prices and harms farmer profit margins, subsidisation and investment into agriculture to further improve profit margins and allow for faster increases in production, and improved accessibility by farmers to updated market rates across their accessible market via expansion of telecommunications to facilitate trade. 

While this insurance serves a purpose, that purpose is not to achieve a long term improvement of productivity. Its purpose is to reduce the volatility of agricultural yields. This is a valuable purpose, but it is not for free. Insurance companies, like the rest of the private sector, operate to turn a profit; while this is perfectly understandable, it means that by definition this insurance company and any others following suit will on average drain money from African agriculture and so slow its growth.

It should be up to the discretion of African farmers as to whether the reduction of long term expansion of productivity is worth the reduction of risk due to variations in weather, but it should not be held up as a long term solution to the underlying problem facing African agriculture and African economies generally: lack of productivity. It is up to African governments to implement the necessary reforms to allow for, and to spur economic growth in agriculture; such reforms must be undertaken on both a national level in individual states, but critically also extend to Africa's larger economic blocks such as ECOWAS so as to mitigate local weather variations. 

While I personally condone expansion and facilitation of the free market in most cases, so long as the developed world subsidises its own agriculture, imposes trade barriers to African agriculture, and undermines domestic markets in Africa, the only solution is economic integration and top down support for Africa's domestic production by its governments and inter-governmental institutions. The situation will not correct itself, and it will not be solved by actors from outside Africa, it must come from within Africa itself.

Anything insurance is the devil. Thats how they get you to do whatever they please with you. Its mandatory. Its only done the way they want it. Against your will. You pay or you pay.

I would say insurance is only really worth it to people that don't have enough savings to replace the damage (since on average/and over time insurance has to be more exansive than the damage, since you make costs assesing risk, having administartion, and probably also quite some profit), so this would indeed be a case where insurance is worth it.

Crop insurance, sounds more like communist style food distribution.   We ended the wheat board in Canada because all the successful farmers were getting tired of paying for the ones that were not.   People are not equal.  Weather happens.  Deal with it. 

Well here in the US its mandatory. Anything you do to make a living. Anything . They make you pay for insurance. Its all mandatory. All that money goes to billionaires and over head. They say its to protect yourselves. But its really there to protect lawyers and stupid people. And get people rich.

CME Group has been trading Weather contracts for years; and insurance companies have always been happy to take people's money.

This is a better strategy that help farmers in Africa sustain their farms by getting them insured and monitor the clouds with satellite.
 In the end, they make great gain

I would support a non-profit crop insurance program, one that sees a farmer's coop or credit union in charge of the money. That way you don't have to spend years battling the insurance companies when they decide they don't want to pay out.

I believe a better program would be to introduce hardier crops like wild oats and millet. They can survive droughts. Better yet, use a few years to teach people how to conserve water in vats or whatnot. All this insurance business is based on money with no real eating value. Other than that, they might raise crops that retain a lot of water so as to survive droughts.

Nice thing, but this won't help very long, thanks to the climate change. I think they should keep an eye at closed systems, like greenhouses with no loss of water. That would really help the people in 30 years. Sorry if I made any mistakes.

[REPOSTING THIS REPLY] The premium is 2 euros, and they get 200,000 euros if they have a loss or total loss and need to make a claim. That's like five bucks, USD, and a fraction of what they get if anything goes awry with the weather. It's not that much of a premium, even in that part of the world. I always put myself into the deal before I imagine that anyone else should take it. If I were the farmer, I would want that deal. Also, the premiums are set by transparent, and well-researched mathematical and computer models and algorithms that predict relevant weather patterns for each growing season. This is sound, smart science.

But I know your question was asking the question more rhetorically. I just wanted to add in the above data to the conversation. I think crop insurance is a good idea. But I think the system should be done and administered altruistically, with a light touch. That is, it should be made sustainable, but with not really any/much profit.

Perhaps the insurance could be done as a co-op, where it's administered and the process compensates the administrators (this woman and whomever is doing her research & computer modeling, etc – maybe it's her!) and accounted for, but where any profits are returned as dividends or equity to the farmers.

Since you bring up social and economic solutions, I'd like to point out that I don't see how the two can feasibly be totally separated from one another. Nor do I think they should be. Inherently, they are intertwined.

To that end, co-ops are a VERY good idea for this region, and in general, for both social AND economic justice. As is insurance. But I sense that your skepticism comes in part from how you personally are socialized to think of insurance – as exploitative, rather than salvatory. I understand that, because insurance in the west functions in this manner more often than not. Westerners are more familiar with the insurance industries as profiteers, since that's what insurance means, mostly, throughout the Western world: exorbitant premiums to make exorbitant profits ("for the shareholders", meanwhile the leadership has 9 figure salaries), then shirking the responsibilities to pay claims.

But it doesn't HAVE to be this way, and this women seems like she has both the passionate advocacy for these people in her heart, as well as the knowledge and the expertise – and that her customers are very happy with the value they are receiving. I see her as an ally, and her idea as excellent and something that should potentially be replicated throughout the world.

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