Have you insured your farm as a farmer? How well are you informed about agricultural insurance products on the market available for smallholder farmers in Ghana?
Interestingly, over 90% of smallholder farmers in Ghana have no clue about agricultural insurance, neither do they know how to access insurance products.
Ghana has more than half of its population as smallholder subsistence farmers. It is therefore imperative that critical issues that concern their livelihood be addressed to the detail.
Farmers suffer a plethora of challenges including lack of access to reliable advisory services, access to credit facilities, climate change effects which are detrimental to their operations.
In Ghana, the growth of agriculture insurance has not seen much progress as a result of the many risks associated with farming. Financial institutions shy away from providing insurance to farmers.
The questions they ask are what if it doesn’t rain? What if your cocoa farm is raged by fire? What if coccidiosis kills and empties your coup?
These and many more questions make farming very unattractive to the youth and investors, leaving farmers impoverished.
Before we discuss the state of agricultural insurance in Ghana, let’s find out if farming in Ghana is worth insuring.
Considering the vulnerability of farms we believe no organization will be interested to invest in any venture that will not yield a significant return on investment.
According to research by GIZ, Ghana is classified as the 98th most exposed country to natural disasters especially drought and flood.
The country has a long-standing history of many catastrophic natural disasters and notable amongst them is the 1983 drought which affected more than 50% of the population.
The incidents of bushfires are skyrocketing every year especially the middle to northern part of the country. The last quarter of 2019 and 2020 recorded several fire incidents that destroyed maize and rice farms across the country.
Farmers are left helpless in these plights. Not only do farmers lose, but the nation also suffers huge economic losses.
The outbreak of fall armyworm in recent times that affected about 20000 hectares of farmlands was reported to have cost the country more than US$ 46 million.
You can only imagine how inimical natural disasters can be to the economic health of the nation.
Agricultural insurance has gone through many transformational phases in the past decade. Several challenges have impeded the progress of the industry in delivering sustainable insurance products to smallholder farmers.
Following major research projects geared towards developing a comprehensive road map, it was revealed that agricultural insurance could provide economic stability to agricultural productions and smallholder farmers.
Unfortunately, not many insurance products are found on the market. Insurance companies do not have interest in engaging farmers directly on insurance delivery purposes.
Research conducted by GIZ reported some challenges that hinder agricultural insurance in Ghana. First, it was discovered that low scaling performance of the agricultural insurance market discouraged the effective delivery of insurance products.
Also, the industry saw a very low farmer enrolment rate which was due to financial illiteracy among farmers and the aversion towards new risk management approaches.
Moreover, enrolled farmers could not access funds when they needed them.
The first insurance company tasked to provide agricultural insurance to farmers was the State Insurance Corporation (SIC) in the early 2000s. Unfortunately, the company suffered losses and had the project discontinued.
In June 2011 however, the Ghana Agricultural Insurance Project (GAIP) was birthed out of a feasibility study on crop insurance which was commissioned by the National Insurance Commission of Ghana and GIZ, out of which various initiatives have emerged on the market.
Agricultural Insurance Projects In Ghana
Considering the pivotal role of agricultural insurance delivery to the broad-base agricultural economy, major corporate bodies both local and international have joined hands to help dispense sustainable agricultural insurance products.
Many of which are pilot projects, aside GAIP and Worldcover — which the former is the pioneer. Progressively other startup companies have emerged strongly alongside such as Mfarmpay and AgroCenta who are making financial inclusion possible for our smallholder farmers through digital technology.
Ghana Agricultural Insurance Pool (GAIP)
Established in 2011, GAIP is the premier agro insurance company serving the northern part of Ghana. The pool comprises 17 Ghanaian insurance companies and two (2) reinsurance companies.
They include SIC insurance, Enterprise insurance, Hollard Insurance, Star Assurance, Vanguard Assurance, Mainstream Reinsurance, Ghana Union Insurance, Unique Insurance, Glico General Insurance, Int Energy Insurance, Wapic, Activa International Insurance, Equity Assurance, Prime Assurance, and Swiss Re as the main company insurer.
GAIP has developed progressively since its inception and currently sells five insurance products including; Drought Index Insurance (soybean, maize, millet, sorghum), Area Yield Index Insurance, Multi peril Crop Insurance, Poultry insurance, Forest Insurance.
GAIP has branches and offices in the Upper East Region, Upper West Region and Northern Region. Read more about GAIP here.
Worldcover broke the monopoly in the agric insurance market after GAIP remained the only agric insurer from 2011 to 2017.
After a research by Innovation for Poverty Action (IPA) which revealed that farmers in Ghana are willing to pay above actuarially fair prices for agricultural insurance, Worldcover took much interest in the Ghanaian market to distribute insurance products.
Worldcover leverages on crop parametric technology designed to provide frictionless onboarding. All they require is data on crop type, GPS coordinates of the location and planting date.
With satellite, worldcover monitors rainfall and makes payouts automatically. In Ghana, worldcover partners with Quality Insurance Company (QIC), Mainstream Re and NEPHINA and have so far sold more than 30000 insurance policies to farmers. Read more about Worldcover.
Allianz Insurance Co. Ghana Ltd
Allianz Ghana is an insurance provider who has also shown interest in providing insurance for Agricultural purposes.
The company has recently rolled out a crop insurance policy that will cover maize, sorghum, cashew, cocoa and coffee.
Allianz is hoping to onboard and serve more than 100000 smallholder farmers in the next three years and will cover perils such as pests, flood, fire and drought.
Ghana Incentive-Based Risk Sharing System for Agricultural Lending (GIRSAL)
Through a risk sharing scheme approach GIRSAL provides lending for agricultural purposes. The project is championed by the Bank of Ghana in collaboration with Ministry of Food and Agriculture and Alliance for Green Revolution in Africa (AGRA), to address the bottlenecks in agricultural financing in Ghana.
GIRSAL provides agriculture value chain support in horticulture, cereals, tree crops, root and tuber crops, legumes, poultry, fisheries, livestock.
GIRSAL partners with Agricultural Development Bank, Fidelity bank, Ecobank, Ghana commercial bank, Access bank, Bank of Africa, Stanbic bank, Zenith bank Ghana, etc.
Beside the above mentioned projects, other corporate bodies have provided supports to help scale agricultural insurance delivery in the country.
The USAID Financing Ghanaian Agricultural Project (FinGAP), GIZ Strategic Alliance (STA), Alliance for Green Revolution in Africa (AGRA) and Capacitating Africa Smallholder with Climate Advisories and Insurance Development (CASCAID), are funding various agric insurance projects in diverse capacities.
So far Ghana has no legal policy framework that regulates the operations of agricultural insurance. AGRA Ghana is, however, funding the drafting of the first Ghana Agricultural insurance policy framework.
Conclusively, the agric insurance industry is growing and has the potential to increase the resilience of agri food systems to climate related shocks such as drought, flood, pests etc. and instill confidence in farmers.
Meanwhile, Agtech startup companies such as Mfarmpay, Farmerline and AgroCenta are also changing the narratives of agricultural financing in Ghana through technology.