Rockefeller convening presentation by FSD's Michael Mbaka

1. CLIMATE CHANGE ADAPTATION AND
AFRICAN AGRICULTURE GRANTEE CONVENING
24-25 February 2011
Index-based Weather Insurance Pilot Project
Grantee : Financial Sector Deepening (FSD) Kenya
Presenter : Michael Mbaka
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2. FSD Kenya Brief Background
• FSD Kenya is an independent Trust established to support the development
of inclusive financial markets in Kenya
• Established in early 2005
• Support development of inclusive financial markets in Kenya as a means to
stimulate wealth creation and reduce poverty.
• Working in partnership with the financial services industry
• Financed by partners including the UK’s Department for International
Development (DFID), the World Bank, the Swedish International
Development Agency (SIDA), Agence Française de Développement (AFD)
and the Bill and Melinda Gates Foundation together with the Government of
Kenya.
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3. Project partners
• Rockefeller Foundation: Financing and participation in overall project
management
• World Bank – ARMT: Technical backstopping and participation in
overall project management
• FSD Kenya: Project financing and day to day project management
• ILRI – Index-based livestock insurance (IBLI) pilot project
implementation
• DFID – Livestock project financing
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4. Objectives of the Rockefeller Foundation Grant
• Project objective:
Develop and demonstrate the market viability of index-based
insurance products to reduce the impact of weather risk on
smallholder farmers and pastoralists in Kenya
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5. Key Activities Related to the Grant
• To coordinate the piloting index-based weather insurance products
across a range of agricultural activities (crops and livestock sectors)
• To facilitate the sector to be well-informed on emerging lessons from
Kenyan and international experience in index-based weather
insurance
• To facilitate creation of enabling environment for the development of
index-based weather insurance in Kenya
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6. Highlight on the Progress to date
• 6 crops covered with 14 contracts underwritten in 6 regions:
– maize (6 contracts), wheat (2 contracts), banana (2 contracts), coffee ( 2
contracts), sorghum (1 contract), tea (1 contract)*
• 4 livestock contracts underwritten in 2 regions
• Implementing partners
– 4 insurers out of 8 active agriculture underwriters
– 4 financial institutions
– 2 cooperative societies & 6 factories
• 12 automated stations donated to Kenya Meteorological department for
initial work
• Technical design training for industry practitioners done in January 2011
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7. Key Challenges
• High products prices vs. low economies of scale
• Low technical expertise on contract design
• Basis risk from use of weather data in heterogeneous climatic zones
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8. Lessons Learnt
• There is a strong link of agriculture insurance and access to credit
• The importance of other value chain risks like price risks is critical for
sustainable programme
• There is need for national risk mapping for efficiency in risk
management & to advice scale up potential
• Need for alternative innovate models like NDVI
• Increasing the role of public sector in weather infrastructure
improvement and potential role of national agriculture policy
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9. Emerging Opportunities for Collaboration
• Data sharing platform with partners like Kencall
• Partnership with other value chain actors?
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10. Next steps
• Developing local co-insurance consortium
• Increasing more regions and partners
• National risk mapping exercise
• Value chain approach to future projects
• Incorporating other crops and modeling innovations through
partnership
• Scaling up?
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