A green revolution using frugal innovation: crop insurance for Tanzanian farmers by Meine Pieter van Dijk

What is the best way to help traditional small maize farmers in Tanzania to increase their production? A crop insurance project in Tanzania showed great success in decreasing the vulnerability of these farmers to drought through a simple frugal innovation called Weather Index Insurance. However, a transition from traditional to hybrid seeds is recommended to further decrease vulnerability and increase agricultural productivity.


What is the best way to help traditional small maize farmers in Tanzania to increase their production? Droughts occur more frequently in Tanzania, but the core problem is low agricultural productivity. Local extension services are not functioning properly (Lamek, 2016), while farmers are still using traditional seeds instead of hybrid seeds, which could contribute to achieving food security in the country. A non-commercial private sector initiative is helping these farmers by providing crop insurance. Between 2011 and 2014, the Swiss Capacity Building Facility (SCBF), a non-governmental organisation (NGO) financed by ten Swiss insurance companies, funded four training projects in Tanzania aiming to familiarise maize farmers in the Iringa, Mwanza and Arusha regions with crop insurance.

No new technological options were introduced to reach as many farmers as possible at minimum cost. Instead, the project used a Weather Index Insurance (WII) based on existing satellite images to determine whether drought prevailed in the area concerned during the seeding, germination or ripening period. If the signal is less rain than normal, the farmers registered through their mobile phones are compensated for the damage, ideally by topping up the amount available for calling or making mobile phone payments. This is a frugal innovation (using existing technology), because farmers can insure as little as one bag of hybrid seed bought from the seed company (SeedCo) using their telephone, covering only the germination period), or through signing up for a package for one acre of land through NGOs.

The training projects were carried out by Acre Africa (AA), an international NGO, with a local affiliate (Acre Tanzania). The project contributed to the training of thousands of farmers in the three regions studied. In total, more than 20,000 farmers are insured in the Iringa region and more than 10,000 in the Mwanza and Arusha regions taken together.

Assessing Weather Index Insurance

To assess the effects of Weather Index Insurance for Tanzanian maize farmers, a survey has been undertaken by the author in the Arusha, the Mwanza and Iringa regions. A total of 200 farmers were interviewed using cluster sampling with the villages as sampling units and then selecting farmers’ households per village as randomly as possible. The objective was to analyse the effects of the crop insurance introduced with the support of SCBF on household’s income and assets and on agricultural productivity.

Different ways of supplying insurance were compared. Farmers supported by a local NGO, the One Acre Fund (1AF), showed that insurance is particularly useful if it is embedded in an institutional support structure that is non-commercial and close to the farmers; not using a profit-oriented intermediary (SeedCo) or a combination of a commercial and non-commercial organisations also led to greater success. All modalities re-insure the final risks with a local commercial insurance company and a re-insurance company.

Most farmers did not know how much they pay for the insurance, but were generally positive about it, since the insurance offers a feeling of security and the intermediary organisations reduce the loan in case of a crisis. However, some farmers were critical because no payments were made despite limited rains, or the payouts were too low. They wanted support to find better markets for their produce and more transparency concerning payouts.

Transition from traditional to hybrid seeds required

Supporting the transition from using traditional to hybrid seeds is recommended to increase rural incomes and food supply and contribute to food security in the country. It is important to select the intermediary carefully and to consider crop insurance as part of support package, which should also include fertilisers and additional inputs like pesticides and access to water. There is scope for making the innovation more frugal by really using only mobile phones for registration and payouts, which was currently not always the case. There is demand for this service from other regions, for other crops and risks (like caterpillars). More information and training should be provided to farmers and the insurance needs to be made more transparent. Complaints of farmers should be taken seriously.


An extended version of this article has been published on researchgate: “Going for hybrid maize: the importance of land for the success of maize crop insurance in Tanzania”. Contribution to a World Bank conference on Land and Poverty, Catalyzing innovation in Washington, March 25-29, 2019.


References
Wilfred Lamek (2016) Agricultural extension in Tanzania, PhD, Free University Amsterdam.

Image Credit: ICRISAT on Flickr.


About the author:

KONICA MINOLTA DIGITAL CAMERA

Meine Pieter van Dijkis economist, em. professor of Water Services Management at UNESCO-IHE Institute for Water Education, visiting professor at the Beijing University for Civil Engineering and architecture, and em. professor of Urban management at the Institute of Social Studies (ISS) and the Institute of Housing and Urban development Studies (IHS) of Erasmus University.

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