In Tanzania, Low-Cost Digital Insurance Protects Farmers

Smallholder farming in Tanzania has long been a risky enterprise. The hardworking farmers who raise many of the essential crops that feed their country and the world have traditionally run their enterprises on a shoestring budget, with limited capital for buying seeds and supplies, and little or no protection if harvests fail.

As climate change poses an increasingly urgent threat to crops, the microinsurance company ACRE Africa is stepping up with an affordable, digital insurance product to help these farmers mitigate the impact of extreme weather on their finances. ACRE’s product, Weather Index Insurance, builds on the success of BIMA PIMA, a mobile crop insurance product launched in 2020 with funding from Mercy Corps. ACRE Africa’s Weather Index Insurance tool—developed in partnership with Jubilee Insurance and Tan Management—makes it even easier for farmers to make claims, by collecting weather data by satellite and using it to determine settlements.

Farmers can purchase insurance in low-cost increments via BIMA PIMA scratch cards, which cost 1,000 Tanzanian shillings (Tsh) each (40 cents US) and provide 12,000 Tsh (about US$5) of coverage, or via their phones using a USSD code. They receive payment for claims within 30 days through their mobile wallets.

Smallholders discuss their experiences using ACRE’s product, Weather Index Insurance, which builds on the success of BIMA PIMA, a mobile crop insurance product launched in 2020 with funding from Mercy Corps. Photo: Patrick van Katwijk

For Magreth Masawe, who met with the Queen Máxima in Kilimanjaro during the UNSGSA’s October 2022 visit to Tanzania, ACRE’s coverage provided small but vital compensation after a drought reduced her harvest from 25 bags of maize to only seven. She told the UNSGSA that after seeing the benefits of the insurance, she plans to increase the amount she purchases for next season.

Convincing farmers of these benefits can be challenging, however. That’s why ACRE has recruited local “champions,” farmers who receive training on the product and then teach others in their communities about it. The champions, 60% of whom are women, receive a 10% commission on the premium from selling the scratch cards, as well as a transportation allowance.

Zaituni Jibu, an ACRE Africa champion, told the UNSGSA that the farmers who bought insurance last season have been pleased with the product, and that many of them are purchasing more this year, as well as recommending it to others. She was also able to collect 63,000 Tsh (about US$27) herself after her maize crops were damaged by drought, and plans to purchase more insurance.

UNSGSA Queen Máxima speaks with smallholder farmers during a field visit to learn about ACRE Africa’s digital insurance product called, Weather Index Insurance. Photo: Patrick van Katwijk
UNSGSA Queen Máxima speaks with smallholder farmers during the field visit. Photo: Patrick van Katwijk

ACRE Africa’s champions continue to spread the word about the financial impact of this innovative product. For some, it is an uphill battle. Cleopa Mushi, a champion who grows maize, coffee, and vanilla, told the UNSGSA that many local farmers expressed distrust of the insurance due to concerns that champions could collect the funds and disappear. To address this issue, local government authorities were advised of the project and champions were provided with official IDs to help engender trust among farmers.

Nevertheless, he has been able to register more than 45 farmers in his village and is learning more about different types of insurance for his own farm, including coverage for non-climate-related risks. As the champions continue their work and more farmers see the benefits and enroll in insurance, ACRE aims to expand to more regions in Tanzania, with the goal of enrolling more than 100,000 in the plan.