TOPICS

Crops, Institutions and Orgs, Market Access, Farmers Organizations, Rural Finance

SOLUTION TYPE

Financing Scheme, Knowledge Exchange

REGION

Global or multi-regional initiative

“I hope that Pula continues in the future and that we can continue to improve our future through its benefits.”

Festus Mutio, farmer, Kitui County, Kenya

BACKGROUND

Smallholder farmers produce most of the world’s food, yet they do not have access to services such as insurance and agronomic advice to protect investments in better or more productive inputs. Pula reduces smallholders’ exposure to climate risks, helps them recover from shocks causing harvest losses and increases their productivity and resilience.

WHAT’S INVOLVED

Affordable Insurance

Pula targets people who have never bought insurance before, starting with smallholder farmers. The company develops and distributes insurance products and tailored agronomy advice that protects these farmers from risk and grows their incomes.

 

Practical tips

Pula collects unique farmer data that allows for synchronized, local advice. The agronomy tips are individualized based on farmers’ unique data and adapted from local climate and agronomic conditions, which Pula monitors using both satellite and ground data as well as feedback from farmers through local call centres. 

EXPLORE THIS SOLUTION

PULA offers:

  • Area Yield Index Insurance (AYII) covers all risks that affect yield. AYII cover insures the value of the purchased inputs against low yield and replaces the purchase to registered farmers at the end of the season.
  • Weather Index Insurance (WII) is a short duration insurance that covers farmers when germination failure occurs, often due to drought or delayed rains.
  • Agronomy services based on registration data, local climate and agronomic conditions are provided to farmers as individualized digital extension messages to drive behaviour change and maximize yields from input investments.

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Countries involved

Ethiopia, India, Kenya, Madagascar, Malawi, Mali, Mozambique, Nigeria, Rwanda, Senegal, Tanzania, Uganda and Zambia

Project partners

IFAD, WFP

Project dates

2015 - Present

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Summary

Pula is an insurance and technology company that distributes insurance products and tailored agronomy advice to protect and grow the incomes of smallholder farmers. Pula does not take on insurance risk but instead works with insurers to cover farmers across 10 African countries. Almost all clients own about half an acre and pay less than US$1-US$3 in premiums per year.

 

Challenge/Problem

In sub-Saharan Africa, farming is very often a risky venture, with farmers having to contend with pests, diseases, drought, famine and market fluctuations. These variables affect not only farmers, but also other stakeholders in the agricultural marketing chain, including lenders, processors, exporters and consumers. Smallholder farmers who live at subsistence or near-subsistence levels, most of whom do not possess an adequate asset base or ready access to financial services (e.g. credit, deposit facilities and insurance), are especially affected.

Financial product suppliers are often unwilling to engage with smallholder farmers for fear of loan defaults. When they do, their products typically carry higher interest rates than do non-agricultural business loans, thus reducing the demand from farmers. 

Agricultural insurance offers a valuable tool to help smallholder farmers avoid devastating financial losses and limit downside risk associated with smallholders investing in their own productive capacity. It is estimated that less than 20 per cent of smallholder farmers globally have agricultural insurance coverage, including only 3 per cent of smallholders in sub-Saharan Africa.

Smallholder farmers generally have low levels of understanding and trust in complex financial products. Developing, distributing and servicing agricultural insurance policies in developing countries is complex and expensive for financial service providers.

 

Solution

Pula targets people who have never bought insurance before, starting with smallholder farmers. The company develops and distributes insurance products and tailored agronomy advice that protects these farmers from risk and grows their incomes.

Pula’s insurance products and services directly contribute to the Sustainable Development Goals of ending poverty (SDG 1) and achieving zero hunger (SDG 2). Pula seeks to increase access to innovative financial services that enable farmers to invest in productivity-enhancing technologies whilst building their resilience, ultimately improving smallholder farmers’ household income gains and food security.

The insurance product targets smallholder farmers with plots of a maximum of two acres. These farmers are interested in quality seeds and fertilizer, but they are cautious about the investment required to adapt their long-standing farming practices. As a result, they continue to produce at levels below their potential, resulting in lower household incomes and reduced resilience to shocks. 

Pula’s business model of bundling insurance with agricultural inputs unites partners from different domains, including governments (which play a key role in ensuring an enabling regulatory environment and facilitating public-private partnerships), insurers, credit providers, seed and fertilizer companies and mobile network operators. The bundle includes agricultural inputs (fertilizer and seeds), insurance and agronomic advice. The bundles are distributed by existing networks of trusted agro-dealers at the community level.

As part of the farmer registration process, Pula collects unique farmer data that allows for synchronized, local advice. The agronomy tips are individualized based on farmers’ unique data and adapted from local climate and agronomic conditions, which Pula monitors using both satellite and ground data as well as feedback from farmers through local call centres. The combination of agronomic advice and insurance provides tangible benefits for all farmers, not just those that receive compensation for yield loss during the season – everyone benefits from advice on how to improve productivity.

Access to insurance gives farmers the confidence to invest more in quality farm inputs that can increase their productivity, as the insurance product provides a safety net against systemic losses.

 

Results

In 2019, Pula insured 1.3 million farmers across 10 countries in Africa as well as conducted a pilot study in India. To date, over 100,000 farmers have been issued insurance payouts, and surveys have shown that insured farmers invest 30% more in high quality inputs each year.

When an armyworm attack was reported in parts of Zambia and Malawi by Pula’s field teams and farmers through Pula’s local call centres in the 2018/19 season, an information campaign with three key messages for prevention and control was activated. Over 300,000 alert and control messages were sent in Malawi, reaching 103,162 farmers; in Zambia, over 100,000 messages were sent, reaching 41,892 farmers.

In the two countries, Pula also sent out agronomy tips via SMS, reaching 103,162 farmers in Malawi and 41,892 farmers in Zambia.

 

Lessons Learned/Potential for replication

In order to expand, Pula will need to partner with many more seed and fertilizer companies, either directly or through contracts with governments and trade associations that would sign up multiple input companies in a country.

A major challenge to replication is the need to work with many input companies to alleviate the risk of overdependence on one input company. The long-term success of these partnerships depends on sales that can be clearly attributable to Pula, as the value proposition for input companies is difficult without them.

Agriculture insurance combined with other measures like farmer education and good and timely market information can greatly reduce the immediate difficulties and long-term development setbacks evidenced in the insurance sector, while at the same time minimizing losses along the agribusiness value chain.

 

Next Steps

Pula intends to increase its engagement with trade associations and with governments, especially for capacity-building and mutual learning, as these two stakeholder groups have been very effective in building partnerships in several countries. This approach will help Pula to expand to new markets in Africa and beyond.

Pula will also engage more with lead farmers as focal points among other farmers, government extension officers and members of other organizations. Lead farmers tend to have a slightly better command of technology and are therefore crucial for farmer education. 

Solution Video

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Video Author: IFAD TV

Video Resolution:1280 x 720

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Video Author: IFAD TV

Video Resolution:1280 x 720

Solution Image

Advice to Farmers

Image Author:Pula

Farmers' engagement: Adaptive Messaging Example

Image Author:Pula

Last update: 23/09/2020