Barriers to micro-insurance outreach for pastoralists and crop farmers in rural areas in Kenya

von Kilel, Benard
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Kilel, Benard Barriers to micro-insurance outreach for pastoralists and crop farmers in rural areas in Kenya
Kilel, Benard - Barriers to micro-insurance outreach for pastoralists and crop farmers in rural areas in Kenya

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Micro insurance in Kenya is still undeveloped compared to micro credit and micro savings due to the fact that it offers no immediate benefits to the insured. Insurance companies in Kenya have been taking long to compensate their clients in the case of any peril and therefore insurance is seen as a way of stealing the money from the citizens.
This study has looked into ways of making micro insurance locally available to both large and small scale crop farmers. It has gone a step further to investigate ways of merging up micro insurance and micro credit by using insurance as collateral to acquire loan. It was realized that there is a possibility of selling an insurance contract to a buyer of produce whereby the farmer can later pay the premium after the harvest of the produce. Moreover, there is a possibility of the harvest being used as collateral when it is in the warehouse of the Kenya National and Cereals Produce Board (NCPB). This increases the creditworthiness of the otherwise not qualifying-for-credit farmer as well as the produce being stored waiting to hit the market highs in order to be sold for profit.
To make use of the technology, this paper calls for the development of a mobile application that will enable farmers access information in real time on their mobile phones and thereby being able act accordingly.


Kilel, Benard

Weitere Informationen

Chapter 3, Assessment of risks faced by micro insurance schemes in Kenya:
The concept of insuring the low-income population is a risk in itself. Micro insurance, as one of the tools in risk management strategy is considered successful when it has overcome a disaster in the long run. (Morelli, 2010, pp. 7-9) As already discussed, catastrophes are universal but the ways of managing these risks are dictated by the needs of the insured in that particular area in order to be effective. These risk management strategies should be applied right from the first stage of designing the insurance scheme product to the last stage in a continuous manner in which the new challenges are tackled in order to ensure the sustainability of the scheme. In addition to that, it should be a structured and systematic process tailored to make sure that the scheme achieves its objectives in an efficient and effective manner. In the Kenyan perspective, there are a number of challenges that came with the introduction of the index-based insurance. Despite the fact that the most common barriers of micro insurance like moral hazards and adverse selection were addressed by the schemes' embracement of the new technology (through mobile phones), there are different kinds of risks that seem to be small but it has a big negative impact on the outreach of micro insurance. These are discussed in details as follows:
3.1, Human Resource Risk:
In order for Kilimo Salama to gain acceptance in the community, Sygenta saw the need of using the stockists as delivery channels of their scheme because the farmers had trust in them and they were always near the farmers in case of any problem arising. Despite the fact that Sygenta had to train these stockists on how to sell the premiums, registration and payout system, they are not competent in matters appertaining to insurance since their work was originally to sell the inputs to the farmers. As a result, there is a risk that the stockists are negligent in processing the claims, a situation which leads to the need for them to be trained on information technology (IT) system. This tedious, highly expensive process which calls for training not only to the input dealers but also to the whole input supply chain and logistics, proved problematic and it led to delays in claims which in turn discouraged the farmers on the uptake of Kilimo Salama insurance scheme (Morelli, 2010, pp. 263-264).
As for the case of livestock insurance, there was a risk of information distortion by the staff that conducted the trainings during the field days, farm group meetings and other community events that was objectively held for the farmers' education on livestock insurance (Mude et al., p. 181).
3.2, Political Risk:
Kenya's political structure and politics reaches its peak during electioneering period which is done after every five years. This is in most cases characterized by violence as different communities fight over resources. Communities always pool their resources together in order to overcome the plight of poverty as in the case of Kilimo Salama; the farmers who could not afford to buy the insurance that came with the 8 kilograms of seeds and were interested in gaining access to insurance shared the 8 kilograms of seed with those who bought them. Sygenta estimated that 70% of the farmers who bought the insurance were sharing the 8 kilograms of seeds with one or more other farmers. (Morelli, 2010, p. 263) After the 2007-2008 post-election violence, such self-generated groups who come together in order to pool together resources are seldom because of the breakdown of many trust relationships. The inter-ethnic violence in northern Kenya due to political instability has been a hurdle the administration of livestock insurance. The pastoralists have been displaced from their original homes making it hard for the follow up of insurance cover and payment of indemnity in the case of livestock mortality (Internal Displacement Monitorin
Anchor Academic Publishing


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