Tapping into the Market for Resilience

ACRE Africa joins Business Call to Action with a pledge to reduce the burden of weather- and climate-related risks on smallholder farmers

Nairobi, 10 August 2017 – Kenya-based insurance service provider ACRE Africa has joined Business Call to Action (BCtA) by committing to strengthen the resilience of 1 million African farmers to climate risks with its micro-insurance products by 2020.

Launched in 2008, BCtA aims to accelerate progress towards the Sustainable Development Goals (SDGs) by challenging companies to develop inclusive business models that engage people with less than US$8 per day in purchasing power as consumers, producers, suppliers and distributors. It is supported by several international organizations and hosted by the United Nations Development Programme (UNDP).

Although small farms produce 80 percent of the food consumed in Asia and sub-Saharan Africa, smallholder farmers are extremely vulnerable. Poor weather and climate change can lead to crop losses that set farmers back for months, keeping them in a cycle of poverty. Because these farmers lack the funds to deal with the losses, they remain on the brink of destitution, even in years of good harvest.

Yet despite the demand for risk-mitigation services, the market for agricultural insurance targeting smallholders is virtually untapped. The challenges in this market are indeed great: most farmers have never had insurance before and do not understand it. And due to the high costs of implementation, traditional indemnity insurance requires higher premiums to be profitable than small-scale farmers can afford.

Agriculture and Climate Risk Enterprise (ACRE) Africa has stepped in to meet these challenges. ACRE is not an insurance company, but a service provider working with local insurers and other stakeholders along the insurance value chain. To keep costs low for farmers, ACRE’s inclusive business model utilizes established distribution channels such as financial institutions, agro-dealers and mobile operators.

In addition, ACRE’s insurance products are index-based, which means that payouts are determined by comparisons to historical, regional rainfall patterns. Whereas classic indemnity-based insurance is based on crop damage reported after harvests, requiring a long claims process, index-based insurance triggers payouts automatically if rainfall is significantly greater or less than average. Premium payments and payouts are made electronically through farmers’ mobile networks and there is no need for in-person claims inspections, which can be very costly in remote areas.

“We work to help farmers manage risk so they can improve their livelihoods, but to do this we need to keep our products affordable”, explained ACRE Africa’s CEO Rahab Karanja Kariuki. “Our unique products target smallholders who have few resources to manage climate risks and yet are the hardest hit when droughts and floods strike.”

During the planting season, actual rainfall is measured using a solar-powered weather stations located close to farmers. If the rainfall is determined to be too little or too much, there a payout is sent automatically using mobile money – the amount is based on the deviation from the rainfall index.

In the past four years, ACRE’s coverage of smallholder farmers has grown by an average of 519 percent. The company aims to achieve its ambitious goal of reaching 1 million farmers by expanding into two new African countries (it already has subsidiaries in Rwanda and Tanzania). In tandem, it is developing new insurance products and distribution channels that will meet the needs of farmers in different geographic areas.

“As the first in its sector to tap into a new market, ACRE Africa has established itself as a leader and innovator in agricultural risk management,” said Paula Pelaez, BCtA’s Programme Manager. “Even more importantly, it has demonstrated the demand for risk-mitigation services among African smallholders. And ACRE Africa has met that demand through affordable products that allow farmers to invest in resilience and feed the world.”

For further information:
BCtA: Aimee Brown at aimee.brown@undp.org
ACRE Africa: Esther Kimani at EKimani@acreafrica.com

BctA membership does not constitute a partnership with its funding and programme partners, UNDP or any UN agency.

About Business Call to Action (BCtA): Launched at the United Nations in 2008, BCtA aims to accelerate progress towards the Sustainable Development Goals (SDGs) by challenging companies to develop inclusive business models that offer the potential for both commercial success and development impact. BCtA is a unique multilateral alliance between key donor governments including the Dutch Ministry of Foreign Affairs, Swedish International Development Cooperation Agency (Sida), UK Department for International Development, US Agency for International Development, and the Ministry of Foreign Affairs of the Government of Finland, and the United Nations Development Programme — which hosts the secretariat. For more information, please visit www.businesscalltoaction.org or on Twitter at @BCtAInitiative.

About ACRE Africa: Agriculture and Climate Risk Enterprise (ACRE) Africa is a social business that designs insurance products for smallholder farmers. In June 2014, Kilimo Salama (Swahili for Safe Farming) transitioned from a five-year project supported by the Syngenta Foundation to ACRE Africa, a for-profit social enterprise with independent impact investors. Registered as an Insurance surveyor and company in Kenya, it functions as an advisor to insurers on risk management solutions for smallholders in Africa. The Kenyan entity also has subsidiaries in other African markets, including Rwanda (licensed insurance agent, registered 2013) and Tanzania (licensed micro insurance agent, registered 2015). For more information about ACRE Africa and its innovative insurance products, visit acreafrica.com.