Rwanda launched the National Agriculture Insurance Scheme in April 2019, which is considered by stakeholders as a milestone as it aims to save farmers from incurring losses.

The scheme, which is subsidised up to 40 per cent by the government, is also intended to enable farmers to easily access financial services and ensure the flow of credit to the agricultural sector.

But, according to Senator Consolée Uwimana, a member of the senatorial Standing Committee on Economic Development and Finance, unlike livestock insurance which covers the entire value of the cow and pays a farmer all the money their cow is worth in case of death from disease or unpredictable natural disasters, crop insurance covers the investment alone.

The Senator was speaking on Friday, February 14, 2020, as the plenary was receiving the Committee’s assessment report of the 2018/2019 of the National Bank of Rwanda.

"For agriculture (crops), only investments such as inputs seeds, and fertilisers are insured, indicating that a farmer does not get the chance to get the expected production insured,” she said.

"Insuring inputs alone is inadequate. That makes banks reluctant to lend to agriculture. You should not get a loan of Rwf5 million and insure that amount alone, while you were expecting to get Rwf25 million from harvest. [If that is the case], I think you could not even be able to pay back the loan interest [and the principal],” she said.

Jérôme Mbonirema, coordinator of UCORIBU, a rice farmers’ co-operatives operating in Gisagara, Huye and Nyanza districts, told The New Times that only investments are covered by crop insurance.

"Investments are calculated and get insurance coverage. In case of damage, 80 per cent of the investment is paid within 15 days of the claim,” he said.

Mbonirema explained that four tonnes of paddy (unprocessed) rice can be produced on a hectare of farmland. And, with a kilogramme of unprocessed rice priced at Rwf315 currently, four tonnes (4,000 kilogrammes) would cost Rwf1.26 million. The insurance premiums paid by a farmer is 7.08 per cent of the investment and the government subsidises 40 percent of the premium.

For rice, Mbonirema said, the investment is Rwf414,520 per hectare, while the premium is Rwf29,348 as set by the Ministry of Agriculture and Animal Resources. A farmer pays Rwf17,609 representing 60 per cent of the contribution as the government covers the 40 per cent.

However, speaking to The New Times, Joseph Habineza, the Chief Executive officer of Radiant – one of the insurance companies providing the agriculture insurance – said that it covers the expected production as well.

"We do not cover investment alone, but also the expected production after statistics are considered based on the farmers’ farm productivity trend,” Habineza said explaining that compensations that are given to farmers are based on the premiums they have paid.

Low lending to agriculture

But Senators said that agriculture accounted for only about 6 per cent of the total bank lending yet the agricultural sector contributes about 30 per cent to the country’s economy.

They contended that agriculture as the backbone of Rwanda’s economy should not be getting such a modest share of loans that banks and financial institutions provide to various sectors in the country.

Commerce, public works and construction continued to have the biggest share in total financing, standing at 28.6 percent and 23.4 per cent respectively in 2018/2019, according to the Central Bank report.

Low lending to the sector is partly attributed to lack of insurance to cover agriculture risks.

Senator Juvenal Nkusi, Chairperson of the aforementioned Committee said: "We all need that financing to agriculture rises as the sector is the backbone of Rwanda’s economy, but that is not achieved.”

"We will discuss that issue with various institutions so that we take measures about it accordingly. If we want to increase exports, and returns we should invest in how to attain that goal,” he pointed out.

As per the Monetary Policy and Financial Stability Statement, released on August 22, 2019, by the National Bank of Rwanda, agriculture received Rwf5.2 billion of Rwf550.8 billion loans that were given by banks in the first half of 2019.