agr insurancesCrop insurances schemes are being promoted within the FARMAF project to compensate farmers for weather – related yield losses and simultaneously ease access to production finance.
In theory, insurance offer a financial protection and allows for the transfer of risk of income loss from a vulnerable farmer to a better-endowed insurer. The smallholder farmer is therefore able to repay loans when the event occurs without having to sell off household assets or compromise wellbeing of household members (e.g. withdrawing children from school).

Insurance products being promoted under the FARMAF project:

1. Indemnity-based crop insurance in Zambia

Insurance is provided as part of a credit package – the Lima Credit Scheme (LCS). Targets smallholder farmers organised into groups by district farmers Associations (DFA) belonging to Zambian National Farmer’s Union (ZNFU).

  • Premium is 5% but reduced to 4%; covers loans of average size: US$600 – US$700
  • For both food and cash crops, especially Maize.flood 2

Key players:

  • Zambia State Insurance Company ( ZSIC) issues multi-peril insurance
  • It indemnifies credit obtained for inputs, which is supplied by a commercial bank
  • DFAs co-guarantee loans; facilitate input procurement and access to extension.
  • Forward marketing agreements secured for the loans
  • Interest rate is highly competitive (2 percentage points above base rate).

Table 1: Key outcomes of Lima Credit Scheme and Indemnity-based insurance in Zambia from 2008 – 2014:

Year Number of farmers Hectares Premium (%)
2008/ 2009 600 600 5
2009/ 2010 1,334 2,229 5
2010/ 2011 1,511 3,320 5
2011/ 2012 4,723 10,300 4
2012/ 2013 9,767 21,000 4
2013/ 2014 16,780 36,700 4


2. Index based insurance in Burkina Faso

Weather index-based insurance scheme – covers risk of drought risks; main target are smallholder farmers producing maize. Seeks to ease access to rural credit.

Key players:

  • Planet Guarantee issues weather-indexed insurance; Swiss Re provides reinsurance
  • Credit supplied by MFIs: Allianz Africa for insurance, CVECA and MECAP for credit
  • EARS used for satellite-based tracking of rainfall indices
  • Farmers organised and linked by CPF.
  • Interest rates charged by MFIs undifferentiated from other loans
  • Formal marketing arrangements – including sale of graded maize to WFP, SONAGESS and private buyers being developed.

Table 2: Key outcomes of Maize Index-based Insurance in Burkina Faso from 2011-2014:

Year Number of farmers Hectares Premium Premium (%)
2011 194 227 35,000 10.0
2012 1,340 1,507 155,000 10.8
2013 1,885 1,813 145,000 10.8
2014 2,072 2,212 210,000 9.5


For more information, see policy brief: Is there evidence of linking crop insurance and rural credit and its potential benefits?