Scaling up agricultural insurance in Togo
(Frankfurt, Lomé) Togo is prone to river floods, water scarcity and extreme heat with increasingly negative impact on the population. As the most important economic sector in Togo, agriculture is of fundamental importance for sustainable economic development and food security. However, Togolese smallholder farmers are not protected against climate-related crop losses and have limited access to the finance they need to adapt their production to the changing climate.
In order to offer farmers financial protection against climate related losses, a partnership of local and international stakeholders has formed to offer farmers agricultural insurance bundled with loans. Bringing together expertise from local and international insurance, clients perspectives as well as technological services and innovation, the partnership unites the project initiator and lead Lorica, a broker and microinsurance consultant from Togo, Mouvement Alliance Paysanne du Togo (MAPTO), an agricultural cooperative, Assilassimé Solidarité, a microfinance institution, CLIN, a local data and IT service provider, as well as the local insurance company SUNU Togo and the reinsurance company Allianz Re; the InsurTech eLEAF from the Netherlands will be responsible for data processing and risk modelling.
With financial and advisory support from the InsuResilience Solutions Fund (ISF), the partnership has developed and successfully tested a pilot project for index-based drought insurance.
To scale up the insurance pilot to cover drought and excessive rainfall for up to four different crops (soy, rice, maize and cotton) in all five regions of Togo, the ISF, managed by the Frankfurt School of Finance & Management (FS), and financed by KfW Development Bank, has signed a grant agreement with the partnership. ISF is providing co-funding for the product development and implementation of the agricultural insurance solution.
Cooperatives and microfinance institutions will distribute the product to smallholder farmers by offering loans bundled with insurance. Linking insurance to loans for agricultural inputs allows farmers to invest in risk reducing measures as well as machinery and higher quality inputs increasing their productivity. In case that farmers do not wish to take a loan, they may also take out the insurance directly against payment of the premium. In addition, all potential customers of the insurance product receive financial literacy, awareness and insurance education training.
In case of an insurance event, the payouts are either used as loan repayments or paid directly to the insured farmer. In order to secure a broad outreach to smallholder farmers, the entire process from enrolment to insurance payout processing, including customer relationship management and digital payment solution, will be accessible via mobile phone.