Crop insurance helps farmers mitigate the threat of climate change
changes in climate patterns and more severe climate events, like floods or extended periods of dry spells during critical growth phases of crop production, farmers must contend with increased production risk affecting the outcome of yields and, ultimately, a threat to the sustainability of their operations.
Crop insurance is one of the major risk management strategies used by farmers to financially safeguard themselves from the potential failure of crops, due to climate risk or other uncontrollable natural hazards ( pests and diseases).
Taking into consideration the agriculture sector’s significant contribution to employment, food security and overall economic growth on the African continent, it is imperative to ensure the sustainability of farming operations.
The severity of natural or climate- related events, from flooding and drought conditions to pest and disease outbreaks, has only become more extreme. Coupled with commodity price swings, these events have had wide- ranging negative impact on the sustainability and productivity of primary producers.
Commercial producers tend to have more knowledge and access to insurance solutions, whilst in the case of small- scale and emerging farmers, lacking insurance mitigants, the stability of their output and income could be undermined, creating a negative ripple effect in farming communities.
According to Food and Agriculture Organisation, the main physical risks or natural disasters responsible for losses experienced by crop farmers
INTRODUCTION
worldwide are floods ( at 65percent) and drought ( at 14percent).
Undoubtedly, we are seeing an increase in the occurrence of these natural disaster events, and this is only expected to continue as the climate crisis worsens and without drastic action to mitigate the potentially catastrophic circumstances.
As mentioned earlier, insurance for commercial producers is at more mature levels on the continent. Farmers can access tailored solutions, specific to the perils and types of local crops grown.
In Zimbabwe, Zambia and Malawi, for instance, crop insurance is tailored for tobacco producers, merchants and manufacturers, while in other regions, we find that insurance is tailored for sugar cane, wheat and soybean crops.
Dryland production, which is purely based on rainfall, has become less popular to insure because of the climate risk seen in severe weather events over the last few years.
BOTSWANA
As Africa’s largest financial services provider by assets, Standard Bank is helping agribusinesses across the continent mitigate against climate related risks. Standard Bank offers a tailored agricultural production solution that integrates crop insurance into its production loans to ensure that farmers can mitigate against amongst, others climate risks, throughout a season.
In the case of small- scale farmers, Standard Bank is piloting financing and insurance solutions via the OneFarm platform in Uganda. Launched in 2019, the project brings together multiple players to help emerging farmers enhance production and access to markets. Through the platform, emerging farmers benefit from production finance in the form of inputs as well as embedded crop insurance, protecting their livelihoods in the event of severe climate events.
Another way Standard Bank intends supporting small- scale farmers in Africa is by offering index- based climate cover. Using index- based weather data to determine the extent and impact of climate events, the bank will be able to mitigate climate risk, like flooding or drought to protect the farmers investment for the season.
Standard Bank has identified agriculture as one of the key areas with the potential to drive growth in Africa. But if we are to ensure the sustainability of agriculture on the continent, the protection of harvests against weather events is critical for all farmers, including small and emerging farmers to minimize climate risk, stabilise production and contribute to the prosperity of African communities.