Over 2.5 billion of the world’s adults remain unbanked and have no access to formal banking or semiformal microfinance institutions according to a report by McKinsey.
The report adds that nearly 2.2 billion of these unserved adults live in Africa, Asia, Latin America, and the Middle East and though unserved, they are servable.
Pula Advisors, a fintech firm reimagining agricultural insurance to protect smallholders worldwide, with operations in Kenya, Rwanda, Uganda, Nigeria, Ethiopia and Malawi has partnered with the Consultative Group to Assist the Poor (CGAP) to deploy satellite-based agricultural insurance to smallholder farmers in Nigeria who are estimated to be around 18 million.
With the partnership, Pula will install satellite technology to track a wide range of catastrophes cost effectively, at speed and without missing out on any areas.
“We hope that the high-quality yield and satellite data available today will enable local insurers and Pula Advisors to create an innovative yield predictive model that decreases the cost of area yield index insurance. At the end of the day, we want to make this product more accessible to smallholder families, allowing them to invest with more confidence and increase their yields,” said Emilio Hernandez, who leads CGAP’s work with smallholders.
The satellite’s are expected to help Pula provide farmers with the confidence they need to invest in their farms by protecting them from many types of hazards using its Area yield index insurance which determines the average agricultural yield in a defined area. In below-average harvesting seasons, it reimburses farmers in that area for the value insured (for example, the value of the seeds and fertilizers they used that year).
For providers, the advantage of this type of insurance is that sampling yields for the area removes the need to visit each individual farm. Even so, determining average yields remains costly. Year after year, it requires providers to pay trained auditors to conduct detailed yield measurements in remote areas.
“We are thrilled to work with CGAP to solve this challenge and believe it can make this type of insurance scale across smallholder farmers in Nigeria and beyond,” said Rose Goslinga, co-founder Pula.
In Nigeria, CGAP and Pula will be working with a consortium of insurance and agribusiness companies to bring an area yield index insurance product to market that reimburses farmers in-kind for fertilizers they purchased ahead of below-average harvests. The partnership’s goal will be to lower the cost of offering this product by enabling providers to use satellite imagery instead of auditors to determine average yields.
In 2016 alone, Pula facilitated crop and livestock insurance cover to 400,000 farmers in Kenya, Rwanda, Uganda, Nigeria, Ethiopia and Malawi.