The role of insurance in securing Africa’s agriculture

As climate change intensifies across Africa, agricultural insurance has emerged as a critical lifeline for millions of farmers grappling with unpredictable weather patterns, pest invasions, and disease outbreaks.

In a continent where agriculture serves as the backbone of economies, with millions depending on it for sustenance, agricultural insurance offers a safety net that can secure farmers’ livelihoods, sustain local economies, and support national stability.

According to Dr. Godfrey Tenesi, Managing Director of Equity Bancassurance Intermediary Limited, agriculture contributes between 25 percent and 40 percent of the GDP in East African countries, while over 70% of the region’s population relies on it for food and income.

From Kenya’s iconic tea plantations to Rwanda’s renowned coffee farms, agriculture supports diverse communities across the bloc. However, climate-related challenges, including drought, flooding, and pest infestations, increasingly threaten these agricultural economies, underscoring the need for innovative risk mitigation strategies.

In recent years, African farmers have started adopting mechanization and climate-smart agricultural practices, helping them adapt to climate change to some degree. Despite these advancements, financial insecurity remains a significant issue due to the severe impact of environmental disruptions on crop yields and livestock.

Dr. Tenesi emphasizes that agricultural insurance is a powerful tool for mitigating these risks, allowing farmers to recover after disasters and secure their livelihoods.

Equity Bank, a leader in the financial sector, is pioneering agricultural insurance solutions tailored for farmers of all scales. Through programs like Kilimo Biashara, Equity’s insurance policies cover a wide range of risks, from drought and excessive rainfall to windstorms, frost, and crop diseases.

Additionally, Equity’s livestock insurance, Bima ya Mifugo, provides coverage against disease outbreaks, theft, and accidental injuries, ensuring that livestock farmers don’t face devastating losses.

“With agricultural insurance, farmers are better positioned to weather uncertainties, ensuring they can replant and rebuild without falling into poverty,” Dr. Tenesi notes. These insurance solutions are aligned with the United Nations Sustainable Development Goals (SDGs), particularly SDG 2 (Zero Hunger), SDG 8 (Decent Work and Economic Growth), and SDG 13 (Climate Action).

Despite the tangible benefits, agricultural insurance uptake remains low in East Africa. A recent report by the East African Community (EAC) revealed that less than 3 percent of farmers in member states have adopted agricultural insurance, with high premiums and limited awareness contributing to low participation rates.

Experts believe that increased collaboration between governments and the private sector is essential to drive greater adoption of agricultural insurance. Dr. Tenesi suggests that governments could enhance data collection and risk profiling, making it easier to offer affordable insurance products tailored to specific risks. The private sector, in turn, could invest in new technologies like index-based weather insurance (IBWI), which uses environmental indicators such as rainfall to determine payouts, thus reducing claims processing times and increasing transparency.

By supporting agricultural insurance, stakeholders can enhance food security, drive economic growth, and build resilience to climate shocks across Africa. As Dr. Tenesi reflects, “Now is the time to forge a resilient future for Africa’s agriculture and secure the livelihoods of millions of smallholder farmers.”

As Africa seeks to shield its agricultural sector from climate-induced risks, agricultural insurance stands out as a vital tool to protect farmers’ investments, promote regional economic stability, and build resilience against the climate challenges that lie ahead.