Govt Moots Compulsory Insurance For Small-Scale Farmers

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By James Muonwa

AGRICULTURE financiers need security on investment in agricultural activities of small-holder farmers in light of various climate-induced disasters, an expert has said.

Agricultural Finance Corporation (AFC) Holdings acting chief executive, Francis Macheka said insurance against the vagaries of inclement weather gives financiers a guarantee of recouping their investment in times of calamities, particularly for small-holder farmers considered “high risk.”

“It is the intention of the government to introduce compulsory insurance. We acknowledge the risk of climate change and threats to national food security. There is no doubt insurance has a role for financiers to feel safer,” he said.

“It is true that smallholders are the main players since time immemorial, contributing about 60% of output. However, you will find out that financial institutions are not motivated to finance these,” Macheka told participants at an agricultural insurance discussion Tuesday.

“Despite the immense contributions to the national grain reserves, smallholder farmers remain uninsured, a development that calls for compulsory insurance schemes before they are eligible for agricultural inputs loans such as Pfumvudza/Intwasa,” he added.

Considered high risk, due to their sparse geographical locations which increase transaction costs and small hectarages put under crops, private insurance companies shun dealing with communal farmers.

However, Macheka highlighted insurance enabled farmers to venture into high-risk cropping enterprises with huge potential to enhance agricultural productivity.

The government, through the AFC’s insurance department, is putting mechanisms to rope in private insurers to hedge agriculture activities against losses due to hailstorms, droughts, floods, and pests.

Added the AFC boss: “AFC cannot take this giant proposal alone. It’s a new baby that needs the experience of old insurance firms, therefore, there would be partnerships. AFC is going to enter deals and be able to connect with private sector companies with these tailored products.”

Addressing the same event, Insurance and Pensions Commission (IPEC) Commissioner, Grace Muradzikwa appealed to the sector to avail quality tailor-made insurance products for small-scale farmers at affordable premiums.

Low agriculture insurance uptake which stands at 3% could be increased if farmers were educated on how insurance mitigates losses in times of disasters.

She said insurance underwriters had to restore customer confidence in the wake of unscrupulous firms “ducking and diving” when faced with genuine insurance payout claims.

“There are people with strong views that insurers are there to collect premiums and refuse to pay claims. There is a need for underwriters to restore confidence,” said Muradzikwa.

“Government agencies and private sector, let us ‘future-proof’  agriculture. We need to collaborate so that the industry can be able to outlay products relevant to small-holder farmers.

“The government has done its part and it is now up to us to come up with innovative products which speak to the needs of farmers. There should be no inputs without risk transfer.”