Crop 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.
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).
| 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.
| 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?