While re-emerging from years of conflict and instability, Democratic Republic of the Congo (DRC) is still a fragile economy. Despite DRC’s abundant natural resources and a recent growth rate of 5.8 percent in 2018 (after a fifteen-year low at 2.4 percent in 2016)[1], economic and social development remain limited, with widespread poverty.

Regarding the insurance industry, the sector has very low penetration compared to regional levels. In addition, certain categories of insurance products, such as agriculture insurance, are not yet available in the country. Although agriculture contributes 20 percent of DRC’s GDP employing about 65 percent of its population (2019), its huge potential for poverty reduction and economic development remains largely untapped. The development of agriculture insurance would play an important role in enhancing access to credit for DRC farmers and pastoralists while increasing the resilience of agriculture-dependent households and firms.

With this idea in mind, the WBG recently approved a Financial Sector Development Programmatic Advisory Services and Analytics (ASA) project in the country, to contribute to the stability, integrity, inclusivity, accessibility and sustainable development of the financial sector in DRC. Among various pillars of the project, the development of agriculture insurance plays a significant portion. In this interview we are talking with the Team Leader Alphonsus Nji T Achomuma to get his views on the project in general, and on the agriculture insurance component in particular.

GIIF: Alphonsus, could you please give us an overview of the challenges of the agriculture sector in DRC and the potential role the recently approved ASA project may play in the economy and overall development?

In DRC, the insurance sector has very low penetration compared to regional levels, and this is partly due to the absence of competition prior to the enactment of the Insurance Code in 2015, when  the only insurer, state-owned Societe National d’Assurances (SONAS), had the legal monopoly of all insurance activities. In 2016, the law that provided for the liberalization of the insurance industry came into effect, ending the monopoly of state-owned SONAS and opening up the opportunity for investing in the industry to close the protection gap. 

However, despite the liberalization of the insurance sector as per the 2015 Insurance Code, it took four years for private insurance companies and brokers in the general insurance and in the life insurance sectors to be granted licenses to operate in the country.

Furthermore, certain categories of insurance products, such as agriculture insurance, are not yet available in the country and there is a significant untapped potential of this sector in overall economic development. This is a sector that employs more than 60% of the population.

Under this ASA project, we have designed activities to respond to numerous requests from the Government to help strengthen the financial sector through reforms and capacity building focusing on financial stability, payment aspects of financial inclusion, and enhancing access to finance for farmers and pastoralists via the development of agricultural insurance. We believe that the components will complement each other towards a more stable, competitive, and inclusive system capable of providing affordable financial services and products, which is a precondition for development and poverty reduction.

GIIF: Could you please share with us some highlights of project vis-à-vis the expected outcome/effects on smallholder farmers in the country?

In DRC, smallholder farmers dominate the agriculture sector. They have little financial support and are especially vulnerable to climate change challenges such as floods and pest outbreaks.

The ASA project has a component focusing on agriculture insurance development and the objective of this component is to examine the feasibility of developing insurance solutions for rural communities as part of financial sector development and operationalizing a sustainable agricultural insurance program in the country. This will enhance access to credit for farmers, as well as pastoralists (if the feasibility study is able to identify viable livestock value chains) and support their financial/climate resilience.

This feasibility study will identify technical, operational, financial and institutional challenges and provide recommendations for the development of a market-based agricultural insurance, possibly through a public-private partnership between the Government of the DRC and the nascent and growing domestic insurance industry.

GIIF: In the project design, what are the specific activities planned for the agriculture insurance component?

In general terms, we are starting with the agriculture insurance feasibility study.  The study shall seek to identify promising insurance opportunities for agricultural commodities such as maize, rice, cassava, etc. Value chain analysis includes but is not limited to identification of viable products, implementing partners and potential distributors for the geographical regions to develop the insurance ecosystem.

More specifically, through the study we plan to identify and analyze the value chains and relevant stakeholders; develop cash flow and financial profiles for value chains; assess the nature of farmers, production methods and possibly their willingness to pay insurance; analyze the demand and supply of agriculture insurance. Considering the fact that these value chain studies are a priority for new markets to identify potential implementing partners (Met agency, Ministries, satellite data providers, insurance/reinsurance companies, cooperatives, MFIs, and other local stakeholders), we believe that in the context of DRC too, we will be able better understand the ecosystem, identify main stakeholders and products.

GIIF: Given GIIF’s decade-long involvement in developing agriculture insurance products, in your opinion what would be the involvement of GIIF in the next steps following the outcome of the feasibility study?

The following phase will focus on the development of agriculture Insurance in the country. Should the results of the agriculture feasibility study be favorable, the team would then develop a detailed plan that would include some of the following key capacity building activities: 1) Work with the newly created insurance regulatory authority (ARCA) on suitable policy interventions; 2) Initiate public-private partnerships and identify appropriate forms of government involvement – fiscal incentives (e.g. premium subsidies, tax exemption), support to infrastructure (e.g. weather stations, early warning system, data for weather and yields, etc.) and financial education to farmers through rural networks; 3) Provide training to local stakeholders on insurance to develop awareness and capacity; 4) Design insurance products for the pilot and assist the product launch; 5) Develop and deliver analytical tools with accompanying manuals covering market analysis, product evaluation, actuarial pricing, and portfolio valuation.

Based on the findings of the feasibility study, GIIF would aim to launch a pilot project for maize, cassava, and livestock starting 2021. The benefits of the pilot are expected to reach thousands of farmers and pastoralists in the DRC by 2023. GIIF would be working with select local firms for product design and structuring, contract pricing, products distribution, reinsurance processes and contract monitoring, keeping in mind its decade-long practice that the products should be simple, affordable and sustainable.

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

We thank Mr. Alphonsus Nji T Achomuma for his valuable insights.