Farming has continued to be seen by the financial services sector as a risky venture. From commercial banks to microfinance institutions and the insurance sector, most players want nothing to do with the agriculture industry. This is despite the fact that agriculture employs about 76 per cent of Rwandan population and is one of the top drivers of economic growth.

However, most of the farming activities in the country are carried out on a small scale and are subsistence in nature. This seems to be one of the reasons the sector is shunned by the financial sector, especially insurers.

According to the central bank, Rwanda’s nature of farming is largely to blame for lack of interest from financial institutions. Few farmers use modern farming practices.

According to John Rwangombwa, the Governor of the National Bank of Rwanda, the agriculture sector remains predominantly traditional, making it difficult for insurers to invest in the sector. 

The regulator notes that the agro-industry risk is still too high to predict or for one to be able to make informed decisions. The sector also almost depends on nature for its survival.

"Therefore, it is important for policy-makers, farmers and other stakeholders to de-risk the sector for it to attract investments and other forms of support.

"Hopefully, with the Ministry of Agriculture promoting modern farming methods and practices, insurance companies and other financial institutions will pick interest and invest in the sector,” Rwangombwa said while presenting the bank’s monetary policy and financial stability statement in Kigali on Thursday.

However, some experts differ, arguing that the financial sector should not sit back, hoping that somehow things will get better.

Dr Livingstone Byamungu, the Linking Farmers to Markets (LIFAM) national co-ordinator, believes the growth of the agriculture sector will largely depend on the interventions of financial institutions into the sector.

He said the laidback approach by financial institutions had condemned farmers to challenges that have made their enterprises almost unsustainable.

Byamungu said access to financial services, like insurance and loans, could augment the sector’s productivity and help improve value chain, thus create more jobs and boost economic growth.

Loans to the agriculture sector amount to only 4 per cent of the total loans disbursed by banks.

Many farmers say banks deny them credit without concrete reasons, while the insurance industry has almost steered clear of the sector save for two or three insurers, including UAP and SORAS.

Ray of hope

Though the insurance sector’s total assets increased by about 19 per cent, from Rwf247 billion in December to Rwf295 billion in June, this has not been reflected in support given to the agriculture industry.

Many farmers still struggle to access insurance products.

"It is difficult because banks will not give you money unless you have collateral. Insurance companies are also still reluctant to cover farming activities, claiming that the sector involves a lot of risks,” Anastaze Minani, the president of Dukundekawa-Musasa Coffee Co-operative, said.

The Ministry of Agriculture and Animal Resources is developing a crop insurance scheme for small scale farmers. The ‘all out’ plan, according to Innocent Musabyimana, the Permanent Secretary at the ministry, will benefit more than 105,000 farmers, who will be given micro-cover using farm produce.

Though the permanent secretary did not reveal details on the scheme and when it will start, he said the ministry is currently working with some local insurance companies to achieve the objective.

"We believe the scheme will further help reduce risks the sector faces by, for instance, addressing the challenges of climate change, and thus attract more insurers to support farmers,” Musabyimana said.

He added that they also plan to attract regional insurance industry players to support the sector.

Regional insurance companies like UAP have already launched three insurance products targeting both livestock and crops farmers. The firm is providing cover for crops like wheat, maize, barley, rice, tea crop, coffee, sugarcane, tobacco, horticulture and flowers. The livestock cover targets dairy and beef cattle, poultry, pigs, sheep and goats.

It is, therefore, envisaged that attracting more insurers into the sector will help increase productivity.

Lack of innovation and product awareness

Already, farmers under the Agriculture and Climate Risk Enterprise (ACRE) scheme, a programme launched by the Syngenta Foundation in June, last year, and supported by local insurers, SORAS, say the project has helped them engage in commercial farming in a more sustainable manner. 

However, the  project faces huge barriers, including access to reliable data on which to base agricultural insurance indices that could help players develop the right products for farmers.

According to Dr Blaise Uhagaze, the secretary general of the Association of Rwanda Insurers, farmers need to co-oporate with insurers.

Meanwhile, there is still little understanding of insurance products by farmers.

"There is need to first of all sensitise farmers on how insurance works and its benefits,” Uhagaze said.

"However, market players need to be more innovative and come up with products that best suit farmers,” he added.

Rwanda’s insurance penetration rate is about 3 per cent.

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