International HE partnership cracks drought debt problem

Researchers from the University of Greenwich in the United Kingdom in partnership with the International Food Policy Research Institute (IFPRI) have created a first of its kind credit scheme to cushion smallholder farmers in Kenya’s dryland areas from frequent droughts.

“With this scheme, when the rainfall is below average, the digital insurance pay-out will be triggered and farmers are protected against losses,” Apurba Shee, the lead researcher and a senior lecturer at the Natural Resources Institute, University of Greenwich, told University World News.

According to the university’s website, the Natural Resources Institute is a specialist research, development and education organisation that focuses on food, agriculture, environment and sustainable livelihoods.


Its new innovation that is being tried in the East African nation uses new modelling techniques to trigger payments to farmers if average rainfall is too low.

Shee says the scheme involves “bundling insurance and credit in a scientific way”.

The researchers from the UK-based university developed the unique model with a US$1.3 million grant from the United States Agency for International Development.

“If the rainfall is evenly distributed – one phase with good rainfall and another with no rainfall where the crop is destroyed – the question is how to capture this rainfall distribution in the index insurance that will be embedded in a credit model,” he explained.

The new credit model is likely to benefit thousands of smallholder farmers in drought-prone areas in Kenya.

“The beauty of this [scheme] is that it’s a unique solution that enables poor farmers to access insured bank loans,” said Sarfraz Shah, a manager at the APA Insurance company, a local partner and the underwriter of the insurance scheme.

According to government estimates, Kenya recorded some US$12 billion losses as a result of drought in a four-year period between 2008 and 2011.

With extreme weather shocks and stresses threatening millions across Sub-Saharan Africa, farmers in Masii, east of Nairobi in one of Kenya’s semi-arid areas, have welcomed the innovation.

Masii is a dry region and water is a scarce commodity. Typically, the farmers grow maize, beans, bananas and mangoes. This year, a prolonged drought has taken a heavy toll on their farms and farmers are running into endless losses.

Most of the households here earn around US$300 on average per year. During the dry season, the residents are forced to buy water daily, eating into their meagre income, which they need to buy certified seeds and fertilisers and other farm inputs.

The farmers have been undergoing training sessions to learn skills and modern agricultural techniques.

Some examples of old farming techniques include practising mixed farming, which involves growing subsistence food crops and rearing cattle on the same farm. They also depended on growing traditional drought resistant crops such as cassava, sweet potato and sorghum, which most farmers have since abandoned.

With the threat of climate change effects and a shrinking land resource, farmers are being encouraged to take up integrated farming methods, such as not simply having livestock and crops but using the manure from livestock to provide soil cover and maintain moisture; and ‘climate smart agriculture’, such as using community seedbanks to improve access to diverse locally adapted crops.

To cushion themselves from losses caused by the frequent droughts, they are also being encouraged to take up insured loans in the form of digital vouchers to get farm inputs.

“With this innovative insurance scheme, we will be able to access credit in the form of insured loans to invest further in our farms,” said Moses Kyalo, a maize farmer.

Beatrice Ndavi, 58, was among a group of 70 farmers who participated in the training recently. “The training is useful as it helps us to know how to address our daily concerns,” she said, alluding to growing threats from extreme weather shocks.

In recent years, her crops have dried up before harvest as a result of recurrent drought. “We suffer from a severe shortage of water due to increasingly unreliable rainfall,” said the mother of six.

The drought risks make credit unavailable or too risky for the farmers to invest further in their operations.

Transformative

The new scheme implemented under Global Resilience Partnership has been hailed as a success story, where an institution of higher learning is offering transformative leadership.

“This year, we are expecting around 800 farmers to be covered under [the new scheme],” said Shah.

“If we are able to successfully demonstrate that the product can work, if there’s bad weather and we pay the claims, people will be more excited in the coming years,” he added.

The programme was developed through a multi-stage design process focused on developing innovative solutions for building resilience among the world’s most at-risk communities.

The University of Greenwich has been working in many African countries. It is renowned for its excellence on food security, nutrition and climate change.

“But this particular project, it’s led by the university’s Natural Resources Institute along with IFPRI, where the institute is responsible for the technical design and field implementation,” Shee said.

“We have not partnered with any local university for this project but the Natural Resources Institute [NRI] has been leading many other projects where local institutions of higher learning are partners, and certainly it works better for cross learning and capacity building, which NRI values quite highly,” he said.

Sustainable solutions

Shee says there is a key role for higher education in providing sustainable solutions to food security issues.

“Certainly, the role of higher education is very important, and there have been several initiatives by the Natural Resources Institute to provide training to African institutions on financial capital budgeting and how insurance models can be done,” he said.

Shee, who holds an MSc in applied economics and management from Cornell University and a PhD in applied economics from Penn State University (both in the United States), developed the innovative financial instrument called Risk-Contingent Credit which provides farmers with vouchers in the form of insured loans to buy farm inputs, such as seed, fertilisers and pesticides.

Willis Ogutu, an agricultural economist with Equity Group Foundation, praised the model saying it would enable smallholder farmers to access commercial loans easily.

However, Liangzhi You, a senior representative from IFPRI, says the new programme faces some impediments.

“I would say the commercial bank still needs some kind of incentives from the government to lend to poor farmers,” he said.

“You say there’s a great need to invest more in higher learning institutions in Africa. At the end, what you want is the talent, the people, and there’s great talent in Africa,” he said.

But, he said, “it requires long term investment to grow these institutions” and he laments that brain drain has deprived African countries of the much-needed human capital essential for growth.

“That’s why we need to enhance cooperation with local partner institutions of higher learning,” he added.