Accelerate access to agricultural micro-insurance

I followed, with keen interest, the recently concluded national dialogue which aimed at reviewing Rwanda’s progress at all fronts and developing strategies to transform the country into a developed economy. Agricultural issues surfaced frequently throughout the deliberations. In one of the discussions, it appeared that government is injecting lots of money into financial institutions, mainly through the agriculture guarantee fund and other facilities in order to facilitate access to credit by the much perceived risky rural farmers. Looking at statistics, despite the huge investments by government, banks are still shy of releasing funds to this sector because covariant risk in agriculture is a big challenge due to droughts, pests and animal or crop epidemics. Figures show that loans approved by banks represented only 9.15 percent of the total loans in 2008. This is a reflection of high perceived credit risk in the agriculture sector despite huge government expenditure. It portrays that as long as some real issues are not addressed, finances to this sector will continue flowing to a few large-scale farmers, there by worsening the income disparity within the economy. So, to address some of the challenges that are related to financial exclusion within the agriculture sector, stakeholders need to accelerate agricultural micro-insurance products that provide insurance to small-scale farmers. This can play a direct role in mitigating risk.Policies like animal insurance, crop insurance and index-based insurance should be developed to cover losses resulting from death, disease and accidental injury to livestock as well as loss of crops due to one or more perils plus protection against correlated risk like extreme weather events. This will help to address Rwanda’s poverty which is largely said to be a rural phenomenon with 66.1 percent of the rural population compared to 16.1 percent of Kigali households and 46.5 percent of other urban households. However, measures like vaccinating livestock, strengthening systems to prevent stock theft, planting more drought and pest-resistant crops will continue to pay a great role at mitigating risk. The Ministry of Agriculture statistics show that despite high rural poverty rates, more than 40 percent of Rwanda’s GDP is produced by the 90 percent of the population active in this sector. This reveals the huge potential of this sector. Last year stakeholders led by the Ministry of Agriculture had resolved to come up with weather indexed crop insurance that provides protection for poor smallholder farmers against catastrophic drought. But it seems to be taking ages. The writer is a Journalist gahamanyi1@gmail.com