In May 2020, the World Bank Grroup (WBG) approved a $150 million IDA credit to support Senegal in boosting agricultural productivity and helping build resilient, climate-smart, and competitive food systems while improving the livelihoods of farmers and herders in the extended groundnut basin and agro-pastoral areas. In the country, the WBG’s Agriculture and Livestock Competitiveness Program for Results aims to increase exports of high-value crops such as shelled groundnuts and horticultural products as well as dairy farming productivity and reduce the mortality rate of small ruminants.

The Program will also increase the financial resilience of smallholder farmers from climate-induced agriculture risks by scaling up agriculture insurance in the country provided through its National Agriculture Insurance Company of Senegal (CNAAS). To this end, GIIF in collaboration with the WBG’s Global Risk Financing Facility (GRiF) will design a smart premium subsidy program to maximize utilization of public funds and establish a viable graduation/exit strategy as well as assist in the digital transformation of CNAAS by operationalizing mobile insurance and other digital initiatives.

The Task Team Leader (TTL)  Laurent Gonnet, Lead Financial Sector Specialist based in Dakar, Senegal, and Mouhamadou Moustapha Fall, General Director from CNAAS shared insights on these initiatives in the broader context of agriculture and insurance in Senegal.

Part I: Insights shared by Mr. Gonnet, TTL in Dakar, Senegal. 

GIIF: Mr. Gonnet, could you please give us an overview of the challenges of the agriculture sector in Senegal and the potential role the recently approved Agriculture and Livestock Competitiveness Program for Results may play in the economy and overall development?

Laurent Gonnet: Agriculture accounts for about 16% of national GDP, employing over 60% of the Senegalese labor force. Senegal’s dominant commodities are groundnuts grown as a cash crop, rice, meat and millet, followed by fruits such as mangoes and watermelons, and vegetables: onions and tomatoes. Most of the agricultural land is worked by small-scale, family-based farms engaged in subsistence agriculture.

Government of Senegal employs two national programs Programme d’Accélération de la Cadence de l’Agriculture Sénégalaise (PRACAS) and the Plan National de Développement de l’Elevage (PNDE) to boost crop and livestock production. They include a broad range of measures from the development of sedentary mixed crop-livestock production systems, provision of safety nets for farmers, and subsidized input to the dissemination of production enhancement techniques.

Despite some boost in agriculture output, which mainly stemmed from the expansion of cultivated area and increase in input use, the overall agricultural productivity remains low and the incidence of poverty among farmers and herders is still high in the country. The poor agricultural performance has multiple causes:

• most cultivated land is rain-fed, vulnerable to increasing impact of climate change;
• the production system is still archaic;
• land degradation and weak soil fertility are widespread;
• there are significant post-harvest losses; sustainable access to productive assets is difficult;
• rural communication and market infrastructure are rather inadequate.

Just to name a few challenges we face. Low productivity inevitably leads to low income to farmers, keeping them in the poverty trap.

Against this backdrop, this recently approved operation will support activities and reforms embedded in PRACAS and PNDE to promote sustainable, resilient, and inclusive growth with a special focus on groundnut and livestock.

The main areas include creating employment, expanding exports, promoting Senegal’s integration into the global economy, increasing value-chain efficiency, and helping agriculture adapt to climate change. At the same time, the Program addresses the cross-cutting priorities of gender and youth by supporting greater access to opportunities and resources. If appropriately implemented, the Program has the potential to attract/retain youth and entrepreneurs to the agriculture sector by modernizing agriculture through technology and supporting their future with a gender lens. Overall, with sound governance and collaborative efforts, I am hopeful that this Program can lay a strong foundation for future initiatives in the country. 

GIIF: Could you please share with us some highlights of the WBG’s efforts to increase the livelihoods of smallholder farmers in Senegal?

Laurent Gonnet: Smallholder farmers often have limited access to quality inputs, finance and infrastructure. Our interventions are designed to remove the barriers while taking into consideration the unique needs of beneficiary groups such as youth, women, and the poorest households. 

Alongside a few agriculture projects, the Bank has been financing social safety nets, which include support to cash transfers to facilitate access to the subsidized agricultural inputs program among the poorest households. The Universal Health Insurance Program that offers free premiums and copayments for the most vulnerable is also part of the larger safety net program. In addition, there is a project targeted to youth and women in the poverty-stricken Casamance region to promote investments in agricultural supply chains and aquaculture. The inclusive and sustainable agribusiness development project builds irrigation infrastructure and sustainable natural resources management while providing matching grants to small-scale farmers and inputs packages for smallholders.

The recently approved operation has a focus on investing in water and soil management infrastructure as well as improving market access for farmers and herders. In terms of finance, we focus on two areas -warehouse receipt system and agriculture insurance – which are used to improve rural credit and compensate farmers for crop/livestock losses. GIIF’s foundational work on developing the agriculture insurance system in Senegal is an important contributor to enhance smallholder resilience in front of weather-induced production failure, allowing them to invest more in economic activities and eventually increasing productivity and income. 

GIIF: Given GIIF’s decade-long involvement in developing agriculture insurance in the country, how do you see these new initiatives by GIIF and GRiF contributing to the next phase of development for long-term sustainability?

Laurent Gonnet: Agriculture insurance is relatively new in Senegal and managed through public-private partnerships reaping the lessons learned along the way. The Government is very supportive of the development by providing a 50% premium subsidy and tax waiver; however, other competing priorities tend to delay the premium payment to CNAAS in recent years. Now is a good time to do deep dive and design a new smart government premium subsidy program incorporating international best practices, ensuring the operational integrity of CNAAS.

It is important to understand that to serve smallholder farmers, agriculture insurance needs to operate on a high-volume-low-margin business model that requires product and process innovation. The rapid increase in mobile phone ownership, along with the available success story of mobile insurance in East Africa serves as a viable basis to experiment digitally-enabled insurance solutions. In 2018, GIIF commissioned an insurtech feasibility study that provided a roadmap for digital insurance in Senegal.

The follow-up implementation entails modernizing CNAAS’s data/IT infrastructure to support the scale-up of their risk protection to farmers. This project aligns with the Government’s Digital Senegal Strategy 2025 which has generated favorable policy dialogue and reforms. We believe that the new initiatives will help CNAAS become a sustainable insurer to lead the agriculture insurance space and relieve fiscal space through market-based solutions for livelihood protection.

GIIF: This is indeed a potentially transformative time for the agriculture sector in Senegal with the WBG’s multi-dimensional support to improve sectoral performance, sustainability, and resilience leveraging technology with a focus on welfare and livelihoods protection of farmers and the most vulnerable.

Part II: Mr. Fall gives us an overall picture of Senegal’s national agriculture insurance company - CNAAS.

GIIF:  Mr. Fall, based on your experience could you please tell us the main achievements and challenges so far towards the development of agriculture insurance in the country?

Mouhamadou Moustapha Fall: In 2007, the Government of Senegal decided to establish CNAAS to promote agriculture development and support rural agrarian communities. The operation officially commenced in 2009. Even today, a public-private partnership for insurance is rare and innovative in West Africa. However, we keep evolving and accumulating institutional capacity and operational know-how thanks to GIIF and other partners, engaging with our rural customers to develop products that are more tailored towards their needs and aspirations. So far, we have reached close to half of the farming households and over 500,000 policies issued.

Building financial awareness amongst farmers is a challenge. Lack of awareness of insurance remains one of the main obstacles for insurance uptake in rural areas. We have trained field staff and updated educational materials to better engage with farmers to promote understanding of the benefits of risk protection. Data, modeling, and analytics are core in insurance operations. We have invested in talent and information technology systems with the help of development partners and created dedicated teams to institutionalize best practices. For example, we have established an Index Design team to collaborate with international insurers for product development/improvement.

Making agriculture insurance available and affordable is a grant task due to the highly volatile nature of agriculture risks. It needs experience, expertise, and consideration for localities (risk profiling). Moreover, the case of selling standalone insurance policies is still rare and we are moving toward a more customer-centric approach of bundling insurance with other financial services and inputs to increase client value. We have started to offer credit-linked insurance. To best serve smallholders, we continue seeking and working on new partnership opportunities with aggregators, input providers, banks, and mobile network operators.

Finally, to drive scale-up, innovation is needed in all processes of insurance from rating, distribution, claims adjudication to payment facilitation. It is imperative to be agile to changes and cultivate a culture of innovation. We are in the process of formulating a comprehensive digital strategy to bring our company to the next level.

GIIF: Regarding CNAAS and looking ahead, what is your vision in this field and your views on digitalization efforts to realize this vision and organizational goals?

Mouhamadou Moustapha Fall: CNAAS’s vision is to be the most valued partner to de-risk farmers and the agriculture sector in the country. As I mentioned earlier, we are developing our strategy on digitalization and are excited about this new journey thanks to GIIF’s assistance. As COVID-19 boosts adaptation of digital systems in many countries, it becomes even more crucial to redesign our operating model to fit the digital age and leverage new technologies to build operational resilience and serve our customers better. Our next big product innovation with new partners will be mobile insurance.

To get ready for the launch, an interactive insurance platform will be built to ease farmer enrollment, policy administration, premium collection, and claims payment. The back-office IT system and database portal will be enhanced to prepare for scale-up and information processing. The back-end portal needs to be interlinked with the front-end platform through a centralized database. This will be a huge IT project that will require upskilling trainings for multiple departments and smart organizational change management.

The road ahead will not be a smooth one but only by challenging ourselves and learning to adapt to new possibilities can we realize our full potential as an organization to close the protection gap, empower farmers and restore a sense of pride in farming. I think all the digital initiatives and transformational journey not only help us increase our competency to serve and serve better, but also position us as a trusted partner in the larger insurance ecosystem.

We thank Mr. Gonnet and Mr. Fall for their valuable insights.