Proposed insurance policy to benefit agricultural sector in Tanzania

Proposed insurance policy to benefit agricultural sector in Tanzania
Coffee Plantations in Mbeya

Farming in developing countries is exposed to a variety of income uncertainties ranging from fluctuation of prices and unpredictable weather patterns, thus holding back efforts to lift people out of poverty. With the proposed insurance for farmers, the agricultural sector is likely to record a notable progress.

It is well known that such uncertainties induce substantial income risks, and these can be detrimental to small or poor producers in developing countries. Such uncertainties have been blocking about 80 per cent of the population depending on farming from accessing lending houses.

“Lenders have traditionally regarded agriculture as being too risky,” said the Commissioner of Insurance and Chief Executive Officer of the Tanzania Insurance Regulatory Authority (TIRA), Mr Israel Kamuzora, at the inauguration of the Regional Certificate in Agriculture insurance programme in the country last week. He said the absence of crop production credit is a bottleneck to access and adoption of improved farming technology, certified seeds, fertiliser and plant protection chemicals.

“Agriculture insurance is still the main solution to the risk and uncertainties to the farmers,” he added. Tanzania launched a trial service of insurance to small-holder farmers in a drive to boost agricultural development in the country. Agriculture insurance has shown to be a way of increasing small farmers’ access to seasonal loans in many countries and may have similar role to play in the country.

The project that started this month is aimed at boosting agricultural productivity and empowering local farmers. Mr Kamuzora said that the trial was a first step toward introducing full-fledged crop insurance. Agriculture accounts for a half pf the GDP. The Bank of Tanzania (BoT) and TIRA are finalising the formation of a special unit to oversee the establishment of an indemnity cover in crop and agricultural sector to ensure farmers are free from various risks particularly those related weather.

“The process of picking up a consultant and volunteer staff for the operationalization of the crop and agriculture insurance unit has reached an advanced stage,” remarked insurance commissioner. He said the main beneficiaries of the non-commercial insurance cover will be farmers engaging in the cultivation of food crops like maize, beans, barley and sunflower.

The pilot project is already underway in Kilimanjaro and Manyara regions. The insurance services, supported by the World Bank in collaboration with the country’s insurance supervision department, will scale it up to other districts upon initial success. “Crop and agriculture insurance is fundamental to the national economies as adverse weather events like drought, floods and storms that cause heavy losses to farmers pose a major threat to production and reduced farmers’ incomes,” he said.

Agriculture insurance, he added. will be extended to cover losses of livestock, fisheries and forestry caused by weather and other events beyond farmers’ control. Despite the fact that insurance industry has been growing at a healthy rate of over 20 per cent annually for over a decade, its penetration level is just 1 per cent of the country’s GDP against the world average of 2.3 per cent.

Farming remains to be the most important economic activity in the region and in Tanzania it accounts for almost 80 per cent of the living of its citizens. In Kenya, it carries about 75 per cent, Uganda 82 per cent, Malawi 80 per cent, Mozambique 80 per cent and Ethiopia 85 per cent.

Records indicate that agriculture employs about 60 per cent of the work force in Africa, in a continent whose population is over 922 million. However, with production risks like vagaries of weather and prices uncertainties for agricultural inputs and outputs, and with the insurance sector shunning the sector, three-fifth of the farmers in the continent still practice subsistence farming.

Despite colossal contribution of agriculture to African economies, the continent’s insurance stakeholders continue to disregard the sector. As a result, both agriculture and the insurance sector, remain largely underdeveloped. The Director of the Nairobi College of Insurance, Mr Ben Kajwang, said agriculture insurance is a form of risk management used to hedge against dangers and will help smallholder farmers’ access loans from lending houses.

“Financial lenders in the region have traditionally regarded agriculture as being too risky,” he said. As trainers rolling the course to nurture agriculture insurance experts in the region aims to give farmers assurance of their farming activities that will ultimately call-off weather related poverty.

The course being carried in Tanzania has already been rolled out in Kenya and Uganda, later to Central African Republic, Comoro, Democratic Republic of Congo (DRC), Djibouti, Eritrea, Ethiopia, Madagascar, Mauritius, Seychelles, Somalia, Sudan and Zambia. Malawi is now one of the few African countries where small-holder farmers are insured against such climate hazards as drought and floods.

The training on the Regional Certificate in agriculture insurance is facilitated in conjunction with the College of Insurance-Kenya, United States Agency for International Development (USAID) under the Competitiveness and Trade Expansion (COMPETE) program, Institute of Finance Management (IFM) and TIRA.
Source: Tanzania Daily News

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