Impact case study database

Together, the two UEA research insights described in Section 2 suggested a specific role for agricultural insurance. Informal insurance (mutual support) discourages investment, which points to a role for formal insurance [R4]. Formal agricultural insurance could encourage investment, provided all major risks are included [R1, R2 and R3]. Yet crop insurance is usually unfeasible for smallholder farmers due to the high costs of claim verification. Weather index insurance (whereby compensation is based on a weather index correlated with crop growing conditions) is more feasible, but still leaves major risks such as pests and counterfeit seed uninsured. UEA research thus pointed to weather insurance combined (‘bundled’) with protection against these other risks [S1 and S2 in Section 5].

Building on these insights, UEA researchers co-produced risk management solutions, working with government officials, farmers and insurance companies, in three stages of research dissemination described below. These risk management solutions make use of satellite images to offer farmers insurance against droughts and erratic rainfall. Inspired by the UEA research, weather insurance is now offered together with certified seed and other agricultural inputs, so that the major risk factors are taken care of. This gives farmers confidence to invest and provides them with a safe way out of poverty.

Impact 1: The government of Uganda decides to promote agricultural investment through bundled weather index insurance.

In the first research dissemination stage, UEA research insights were discussed with farmers, field specialists and representatives of government, NGOs and the private sector: about 50 individual meetings between March 2012 and June 2015 and four workshops attended by c.100 people [S1]. The discussions focused on the agricultural inputs that weather insurance should be ‘bundled’ with, so that the major risks to crop growing are protected against, and loans for high-productivity agriculture can be taken out with confidence [S1, S2]. A best-practice analysis of UEA research in Uganda was commissioned by the DFID-ESRC Growth Research Programme (DEGRP) to help other researchers see how they might enhance the impact of their own work. It found that the collaborative, iterative approach taken by UEA researchers helped ‘boost the standing of smallholder farmers in Ugandan policy discussions’ [S5, p. 8] and provided evidence to bolster the mission of the country’s leading agricultural consultancy, AT Uganda who set out to promote agricultural innovation in Uganda [S5, pp. 10-11]. This paved the way for the policy impact that resulted for the period 2015-2020.

In the second research dissemination stage, UEA researchers worked with the Ugandan policy advocacy network PASIC (Policy Action for Sustainable Intensification of Cropping Systems), who have a desk in the Ministry of Agriculture, to identify and approach the relevant government officials for influencing policy. This led to the two main government agricultural policy documents for 2015-2020, the main one of which is the Agricultural Sector Strategic Plan, to draw on UEA research to advocate ‘bundled’ weather index insurance for promoting agricultural investment. The former Senior Policy Analyst for the Ministry of Agriculture, wrote to Verschoor, ‘“In the original draft of the Agricultural Sector Strategic Plan 2015/6-20, promoting weather index insurance had not been mentioned as one of the five core activities that will be implemented within the Uganda Climate Smart Agriculture. As a result of your research recommendations, weather index insurance has been incorporated in the final draft. This would not have been possible if you had not shared with us your research recommendations as this provided the necessary evidence to lobby for these changes. [T]he role that weather index insurance can play in facilitating the transition […] to progressive farming strategies is […] appearing on Uganda’s policy frameworks on agriculture for the first time as a result of your research recommendations’ [S3].

This policy impact required intensive engagement with farmers, field specialists, government officials, insurance experts and other stakeholders. Experts on evidence-based policy making have noted that the collaborative nature of this approach facilitated impact. The head of the Research and Policy in Development (RAPID) programme at the UK’s Overseas Development Institute, writes in a 2019 blog ‘ A project on farmers’ attitudes towards risk in Uganda […] developed a highly collaborative, iterative approach to engagement, working with farmers, as well as local and national policy makers to co-create policy proposals that would work at all levels’ [S4].

The agriculture theme lead at the DFID-ESRC Growth Research Programme (DEGRP), comments on the unusual care UEA researchers took to tease out policy relevance of their findings: ‘In this case, however, we have a rarity. The study used experimental economics to elicit farmer perceptions of risks in agricultural investment. The researchers next discussed their findings with farmers and field specialists in the locality where they carried out their studies to identify possible practical implications. Then they took those insights to a national dialogue with government, non-government, donor, academia and private sector stakeholders to consider what might be feasible and promising nationally. So unusual is this process that we asked the team to document in detail what they did’ [Foreword to S1, p.3].

Impact 2: Ugandan insurance companies provide improved weather insurance, with about 200,000 farmers insured in 2020.

After including the recommendations suggested by UEA research in its 2015-20 strategy documents, in 2016 the Ugandan government partnered with the Uganda Insurers Association to launch a new agricultural insurance scheme. Ten insurance companies formed the Agriculture Insurance Consortium (AIC) to provide the bundled weather insurance that UEA research recommended. The insurance premium is subsidised by the government: smallholder farmers pay 50% of the commercial rate in most of the country, and 20% in particularly drought-prone areas. By June 2020, 196,991 policies had been sold [S6], which is a remarkably rapid market penetration. AIC estimates demand to be 220,000 by the end of 2020 and predicts demand to rise to over 575,000 insured farmers by 2025 [S6].

A Consortium Officer to the AIC explains in a letter to Verschoor what this means for farmers: “ *To give you a sense of what that means, a typical smallholder farmer insures a harvest value of 250,000 Uganda shillings. The premium on that is 5.5% for weather index insurance and after the subsidy is 2.75%, which comes to 6,875 Uganda shillings. If the satellite shows that a drought causes complete harvest failure, then the farmer will receive 90% of 250,000 Uganda shillings, which is 225,000 Uganda shillings.*” [S6] The premium that the farmer pays for protection against drought and ruinous harvest failure of UGX6,875 is 3% of the insurance pay-out of UGX225,000 received. That pay-out restores the farmer’s income from crops to 90% of its normal value of UGX250,000. It follows that farmers considering an agricultural investment no longer need to worry about drought.

Impact 3: Insured farmers increase investment by 60-100%, a safe way out of poverty.

In the third stage of research dissemination, UEA researchers advised Ugandan insurance companies on the design of new insurance products, focusing on features that, in accordance with UEA research, will encourage smallholder farmers to invest. Insurance company MUA is one of the biggest providers of the new insurance products in Uganda, having insured more than 60,000 farmers to date [S7]. MUA’s Head of Agriculture Insurance has assessed the effects on farmers’ investment of the bundled weather insurance products UEA research recommended. She estimates that insured farmers increase investment by between 60 and 100 percent and links this to UEA research: “ Your research on agricultural investment helped show which kinds of insurance products would be appealing to farmers” [S7].

**An illustration of this is provided by a farmer in Bunamwamba village in Bwikhonge sub county in the Ugandan Bulambuli district, who purchased the new insurance that UEA research recommended. As he puts it, “ **From my perspective, [the new] agriculture insurance is beneficial to us farmers because it enables us to borrow money from financial institutions and invest in farming without worrying. When you borrow money to invest in farming and there is a drought, you lose twice; you lose the crops, and you have to sell one of your assets to pay the money you borrowed. But if you have agriculture insurance, it will pay the money you borrowed.” [S8, p.12]

The future looks bright for the new insurance products that UEA research recommended and helped make possible. m-Omulimisa, a Ugandan agriculture technology company, has started providing the new insurance products in innovative ways, with equally promising effects on investment. Its Managing Director writes to Verschoor: “ *We have developed an app that makes purchase of index insurance extremely easy. We give farmers the opportunity to buy the insurance together with certified, high-quality agricultural inputs such as seed and fertilizer, as well as to take out an affordable loan (1.08% interest per month) for buying these inputs. To make sure that small-scale farmers are reached, we use a village-agent model. The village agents have a smart phone that they use to buy bundled insurance (insurance plus the other things mentioned) on behalf of the farmers. The model works well. We estimate that farmers double their investment in agricultural inputs as a result of the insurance, which means that the productivity of their farms increases in a safe and sustainable manner.*” [S9]

Recognition of outstanding impact

For the UEA research impacts described in this case study, D’Exelle and Verschoor won the prestigious 2020 ESRC Celebrating Impact Prize for Outstanding Business and Enterprise Impact [S10].