Impact case study database

The 2011 UN Global Hidden Hunger Index is designed to measure and track hunger comprehensively. Of the 20 countries with the highest index scores, 18 were in sub-Saharan Africa [A]. The region is susceptible to inherent agricultural supply chain nutritional deficiencies and to escalating climate variability [1-3].

Working with Biffis and Makuch, researchers Chavez and Conway [4] identified a critical gap which meant that bank lending decisions and insurance policies did not serve the needs of many smallholders in the economically marginal and climate exposed sub-Saharan Africa [B]. Agricultural insurance in emerging economies suffers from poor data quality, limited claims experience, high monitoring costs and low uptake [4, B].

Building upon Conway’s foundational research in integrated agricultural practice for resilient food systems and supply chains for sub Saharan Africa [1,2], Chavez extended his PhD research and with Makuch, secured the WINnERS Project [C]. This project implemented a parametric insurance mechanism, integrating agricultural science and economics with weather-related risk insurance, which together with the loan and institutional arrangements make up the basis for this Impact Case Study [D]. The structures that provided the pathway for impact are represented in the following WINnERS Project diagram:

In sub-Saharan Africa, banks and insurers, are powerful players in the food system. The integration of satellite datasets, models, financial schemes and stakeholder engagement enabled an evidence-based risk instrument which lending institutions and insurance companies could use to justify changes in lending behaviour [6]. By bundling farm loans with WINnERS’ national crop loss insurance mechanism, the value of insurance could be recognized at a bank's portfolio level, resulting in lower collateral requirements, thus increasing the credit worthiness of smallholder farmers [E]. The insurance policy launched in Tanzania was the first to protect farmer-level needs, while being managed as a country-level risk transfer instrument.

Chavez, Makuch and Biffis worked closely with private sector institutions to form novel agreements, negotiating under the auspices of the EU’s Climate KIC programme, with each of the World Food Programme, CRDB Bank, NMB Bank, Akiba Bank, Munich Re and Private Agricultural Sector Support (PASS), a Tanzanian Trust offering credit guarantees on agribusiness loans and promoting improved local agricultural practices [F]. Willis Towers Watson conducted due diligence of the WINnERS project, noting that it would unlock a key barrier to insurance and loans for African smallholder farmers [D, E]. Munich Re and Tanzania Re, together with the WINnERS Project (Chavez, Biffis and Makuch), brought to market a cost-effective solution (35% cheaper than the closest alternative) [G].

Jubilee Insurance brokered the insurance policy in Tanzania. Three national banks placed the insurance policy in their loan programmes and PASS offered a partial guarantee for the loans. The pilots resulted in a total of $13m bank input loans and $5m of insurance coverage [H]. The decision in 2017 by MunichRe to issue a country-wide reinsurance policy for Tanzania was directly informed by Willis Towers Watson [E]. The Global Agricultural Risk Lead for MunichRe, notes in their letter that the WINnERS team’s innovations, ‘. ..tailoring insurance prices to the risk profile induced by the production technology adopted yields greater product customization, including the ability to promote climate resilient crop production’ [G].

WINnERS Pilot team members together with the World Food Programme and the World Bank, quantified the impact of the two pilots carried out during 2015-17. They estimated that a total of 50,000 Tanzanian households and nearly 400,000 individuals involved in agricultural production benefited [I]. The World Bank noted that 88% of households gained access to finance for the first time [I]. By accessing funding based on the purchase of better agricultural inputs (and associated extension services), smallholder farmers were able to double their average yield [J]. As smallholders had an average farm size of only 2.1 hectares, the boosted yield was transformational, pushing production levels considerably above the survival (and hence default) line, and allowing part of the crop proceeds to be saved and re-invested [D, H]. PASS notes in their letter, “ The presence of both insurance and credit guarantee delivered sizeable credit enhancement to smallholder farmers usually excluded from the financial system...” [K].

The success of these ventures led to three new investments developed by Chavez, Makuch and Biffis [D]. The EU Climate KIC’s second Imperial College parametric insurance investment (Arise Project €3.2 million) builds on the WINnERS approach, deepening farm-level resilience and sustainability responses. The second, funded by the New Venture Fund, deploys the de-risking solutions developed by the Imperial team to assist women farmers to access finance, promoting gender inclusion. The third project, funded by the African Development Bank, extends the de-risking solution to a larger pool of banks in Tanzania, Ghana, Uganda, Zimbabwe [L], providing financial and climate de-risking for up to 1.6 million maize and sunflower farmers. Jubilee Insurance states that Imperial’s “ novel up-scalable insurance scheme has allowed the company to expand its offering to smallholder farmers by 70% year-on-year and to reach a much larger pool of prospective customers, given the involvement in agricultural production of entire households and villages” [F].