Protecting smallholder farmers and building resilience [interview part 2]

Protecting smallholder farmers and building resilience [interview part 2]

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To protect food security and combat rural poverty, Oikocredit joined the Smallholder Safety Net Upscaling Programme (SSNUP). In the second part of this interview, Ging Ledesma, Director of Social Performance and Innovation at Oikocredit, shares about how Oikocredit is contributing to SSNUP with weather index insurance and the price risk management programme.

SSNUP interview 3

How does Oikocredit intend to help SSNUP achieve its goal?

We are combining different approaches. Our cooperative currently has three proposals that we are working on: weather index insurances for African countries, the expansion of our price risk management programme to Africa and Asia, and the expansion of agricultural portfolios with microfinance partners.

An important question for us is: how can we provide the farmers with more financing solutions? You have to develop the right products that take into account the remote locations, the processes and the risks in agriculture.  Many questions arise: how is the financing paid out? How do you support the farmers so that they can repay their loans? How is the monitoring done? In urban areas, microfinance institutions also offer business development services to businesses in the informal sector, what would the equivalent be in the agricultural sector? Our price risk management programme that we designed for coffee cooperatives in northern Latin America will now be adapted for Rwanda and possibly Uganda. All material must be translated from Spanish to English. In addition, coffee organisations work differently in Africa than in Latin America.

We have already started with preparations and assessments, but once the Covid-19 regulations are lifted, we will be able to visit the organisations in person to properly check their conditions, see what they need and identify what their strengths and weaknesses are. Then we will offer customised training courses, which will focus on things like better management or how to deal better with price risks. An exciting extension of our work for the SSNUP project is weather index insurance – an offer to smallholder farmers that can still be massively scaled up.  

How exactly does a weather index insurance work?

This type of insurance is not only paid out when there is recognisable damage. Instead, a detailed analysis will be done in each agricultural zone to see what weather issues may arise and impact the farms. And once a weather event occurs, we can know what effect the weather event might have on the farm and payment claims can be made to the farmers. Proceeding in this way will save costs because it allows a more precise risk assessment based on long-term weather data. In order to develop such a product, however, you need very precise knowledge. We would have to conduct research on site, carry out measurements, and collect and collate data on weather conditions. You also need to create an index for each individual grain, such as rice or corn, and develop a business model for each product. A digital platform is also needed so that people in rural areas can find out what insurance benefits they can claim.

Which partners will Oikocredit work with for SSNUP?

We aim to work with twelve new organisations for the weather index insurance. For the time being, we started with three partner organisations to prepare weather index insurance for smallholder farmers. Four countries will be involved in this project: Senegal, Côte d’Ivoire, Mali and Burkina Faso. Our partner, Inclusive Guarantee, will scale its existing index insurance policies based on the research results and apply them to smallholder farmer needs, develop the product and coordinate the application.

We are currently working with 21 partners in Latin and Central America for the price risk management programme and will assess which partners we will work with across Africa and Asia. In Rwanda we have now selected the partners who will take part in the price risk management programme. There we will also work with a consultancy that is familiar with the programme, as tackling the needs of agriculture and insurance requires very specific expertise. There are many external factors and requirements, such as infrastructure, government regulations, international trade conditions, etc., all on which SSNUP is dependent. Our main job is to coordinate and organise.

Can the impact investors take political action to help protect smallholder farmers?

We can't lobby. But the mere fact that we have two national organisations on board gives me hope that positive change is possible. Especially since the organisations use government funds and are otherwise extremely active. Rural poverty has many causes: weather, climate change, a lack of knowledge and skills at the cutting edge of technology, inadequate access to markets and finance, and unfair practices. The SSNUP programme makes it possible to look at more aspects than before and to find solutions. The five largest impact investors can achieve more together than one alone, we get a forum where we can exchange ideas, share knowledge and work with one another to achieve this specific goal. The timing is a bit uncertain because of the pandemic, but I hope that we will be able to really get started on site in the second half of the year. We can currently plan and prepare, but at a certain point you need direct contact with people.

To find out more about SSNUP and how and why Oikocredit is involved, read the first part of this interview.

This interview was conducted by Marion Wedegärtner from Oikocredit’s West German Support Association.

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