PlaNet Guarantee - Burkina Faso
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Clients:
17,535 (end 2015)
Partners:
Insurers: Allianz
Reinsurers: Allianz Re, Africa Re, Cica Re, Hannover Re
Product Design: PG (cereals), PG & I4 (cotton)
Delivery Channels: Banks, MFIs, NGOs
Products:
Satellite-based weather index insurance, area yield index insurance
Insured Crops/Livestock:
Cereals, cotton
Insured Perils:
Drought, decreased yield
Total Insurance Portfolio:
78,856 insured farmers and $1,058,810 collected premiums in Senegal, Mali, Burkina Faso, Benin and Ivory Coast.
Project Description:
PlaNet Guarantee provides satellite based weather index insurance and area yield index insurance products for maize and cotton farmers in Burkina Faso. MFIs and banks are the main distribution partners. PlaNet Guarantee activities in Burkina Faso started in 2010 and the first products were sold in 2011.
Insurance Payouts:
$412,656 in Senegal, Mali, Burkina Faso and Benin (2015) with 69 % claims ratio (2015)
Average Cost of Insurance:
11%, $13 per farmer
Development Impact:
Developing a product for cotton was important as it is a more profitable crop (average hectares cultivated are greater among cotton growers). In 2014, 7,500 Sofitex (state cotton company) contract farmers that received input loans from Ecobank through their farmer cooperatives were insured with a satellite index (maize) and area yield index (cotton). A 2011 PlaNet study found that index-based crop insurance in Burkina Faso "has a positive impact on the amount of credit given, the fertilizer purchased, the volume of production and the added value." The amount of credit insured farmers received once they had insurance was 170% more than they received without insurance.
Success Factors:
The variety of distribution channels that support the pilot is the key to the project’s success – microfinance institutions (MFIs), banks, and NGOs. Developing a product for cotton was important as it is a more profitable crop (average hectares cultivated are greater among cotton growers). In 2014, 7,500 Sofitex (state cotton company) contract farmers that received input loans from Ecobank through their farmer cooperatives were insured with a satellite index (maize) and area yield index (cotton).
In addition to Swiss Re, another major international reinsurer, Hannover Re, carried the risk for PlaNet Guarantee's Burkina Faso area yield-based cotton product starting in 2013. Hannover Re's entry into the market is a major development that indicates the growing viability of index insurance in the West African market.
Challenges:
Agriculture in Burkina Faso is relatively under-financed, apart from the cotton value chain. Banks and large MFIs are reluctant to finance agriculture through small MFIs and cooperatives. Input loans are usually disbursed too late for the planting season leading to a late sowing phase for farmers and higher risk exposure.
Opportunities:
The cotton value chain is highly structured, with short term financing needs of smallholder farmers met by the cotton companies. The sector offers a potential of 350,000 insurable smallholder farmers. The possibility to render the product mandatory to all SOFITEX farmers’ offers strong scaling-up possibilities. Regarding the cereal product, targeting larger MFIs and examining mobile distribution are further pathways towards reaching scale.
Contacts:
Souleymane Zare | szare@planetguarantee.org
