Mozambique’s more than 3.2 million smallholder farmers cultivate their lands in a world of risk. Their small, mainly rain-fed plots are located in a region particularly vulnerable to extreme weather events and changing climatic conditions. Flood, drought, and cyclones (such as the devastation caused by cyclones Idai and Kenneth in 2019) can leave them with nothing to harvest and without seed to re-sow.

In the aftermath of a natural disaster, smallholders require immediate assistance and a pathway to rebuild a stronger future. A new partnership between Feed the Future Partnering for Innovation and NCBA CLUSA is working to achieve both for smallholder farmers. In collaboration with Phoenix Seeds (a Mozambican seed business) and Hollard Insurance (a major insurer in the country), NCBA CLUSA is commercializing the country’s first weather-based index insurance policy bundled with improved crop seed varieties.

Using data based on remote sensing technology, the weather-based index––if triggered––will enable an estimated 5,000 farmers in areas affected by last year’s cyclone Idai to receive replacement seed at no additional cost from an official Phoenix Seeds retailer.

In addition to assisting individual farmers access seed and build resilience, the partnership will help develop a commercial, competitive, and viable market for weather-based index insurance and insured products in the country. Thus far, there has been little attention paid to bundling crop seeds and insurance for Mozambican farmers due to their small farm sizes, limited spending ability, and overall low demand for agricultural technologies such as certified seed. Without protection, however, the financial costs faced by a smallholder following a natural disaster can be staggering. According to the World Bank, direct economic losses from cyclone Idai such as damage to agriculture are estimated to be as high $773 million.

This scenario is evolving, however, as seed companies start to develop commercial sales channels for certified seeds and farmers become more aware of their benefits and more selective about seed quality and price. Seeds automatically bundled with weather-based index insurance is a dynamic part of this and may incentivize insurers and seed companies to provide index-based insurance as well as demonstrate value to farmers who can claim replacement seed following a loss and still be able to re-sow in the current season or in the next.

How it Works

Under this partnership, Mozambican farmers making a purchase from Phoenix Seeds will receive the improved crop seed and peace of mind knowing that, should a weather event occur, the season and even the one after it would not be a complete loss. This peace of mind can also translate into increased productivity, as farmers feel more confident investing in new technologies like higher yielding seeds knowing they are protected by insurance.

With a seed package in hand, farmers will be able to use SMS to immediately register important details about their purchase, such as seed type, amount, date, location, and a contact cell phone number. The location of the seed purchase is particularly critical to this process as it provides a geo-reference, such as a GPS or proxy GPS address, linked to the insurance coverage. Remote satellite data for these locations are then collected on a monthly basis and again at the end of the growing season by eLeaf, an independent index provider and loss verification agent. This data is compared with an evapotranspiration index which tracks the levels of water transferred from land to air due to soil and other surface evaporation and from the transpiration of plants. If the collected data reveal levels falling outside the index’s maximum or minimum limits, a claim will be triggered and project partner Hollard Insurance will quantify the claim and pay Phoenix Seeds for the lost seed. Farmers will then be able to collect their replacement seed from the company at no additional cost. 

These efforts will help reveal the potential for scaling-up crop seed bundled with weather-based index insurance for smallholder farmers in other areas of the country. With reduced premium costs and the development of a more robust agribusiness environment through commercial outgrower schemes and agrodealer networks, insuring a greater number of farmers over a larger geographic area becomes more technically feasible and spreads the risk for Hollard and other insurers across a larger swathe of the country.

Additionally, the potential of drones to expedite and lower the cost of claim assessments (compared to traditional field scouting) will be assessed during the partnership. Real-time aerial data collected from drones can help predict issues, such as crop stress from drought or excess heat, up to three weeks before the naked eye can detect it. Information gathered from such tools is vital for communicating early warning and advisory messages by SMS to farmers and for investigating complaints in cases where satellite data from eLeaf does not trigger a claim, but farmers contend they have suffered a crop loss.

Agriculture is a risky business. Transferring some of this risk out of small-scale farming through weather-based index insurance and bundling this coverage with no-cost replacement seeds will greatly support individual smallholders and keep agricultural production from collapsing in the face of severe loss.