Farmer insurances

Farmer insurances
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Farmer insurances
SectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Financials
Insurance
Business Model Description

Offer affordable insurance schemes for agricultural production and protect farmers against climate disasters that affect crop and livestock production.

Expected Impact

Sustain financial liquidity for farmers who are affected by natural disasters or unpredictable weather patterns.

Indicative ReturnDescribes the rate of growth an investment is expected to generate within the IOA. The indicative return is identified for the IOA by establishing its Internal Rate of Return (IRR), Return of Investment (ROI) or Gross Profit Margin (GPM).
15% - 20% (in ROI)
Investment TimeframeDescribes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Medium Term (5–10 years)
Market SizeDescribes the value of potential addressable market of the IOA. The market size is identified for the IOA by establishing the value in USD, identifying the Compound Annual Growth Rate (CAGR) or providing a numeric unit critical to the IOA.
USD 100 million - USD 1 billion
Average Ticket Size (USD)Describes the USD amount for a typical investment required in the IOA.
USD 500,000 - USD 1 million
Direct ImpactDescribes the primary SDG(s) the IOA addresses.
No Poverty (SDG 1) Decent Work and Economic Growth (SDG 8)
Indirect ImpactDescribes the secondary SDG(s) the IOA addresses.
Zero Hunger (SDG 2) Reduced Inequalities (SDG 10) Responsible Consumption and Production (SDG 12)
Country
Regions
  • Rwanda: Eastern Province
  • Rwanda: Northern Province
  • Rwanda: Western Province
SectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Financials
FN

Development need: Rwanda is facing significant challenges in attainment of SDG 8 - Decent work and economic growth, particularly in terms of indicator 8.10.2 - Adults with an account at a bank or other financial institution or with a mobile-money-service provider (% of population aged 15 or over). The score for this indicator is only 50%.(1)

Policy priority: The government is implementing actions to support the agro-insurance industry by subsidizing premiums (2) and exempting them from tax (3), to make them as affordable as possible to smallholder farmers.

Gender inequalities and marginalization issues: Only 45% of women in Rwanda have accounts at financial institutions or with mobile money-service providers, compared with 55.7% of men.(4) Therefore this investment opportunity area is relevant to bridge the gender gap relating to access to financial services.

Key bottlenecks introduction: Bottlenecks include difficulties with access to banking products and accounts, low savings rates because of low savings culture, and limited access to banking products and services in rural areas.(5)

SubsectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Insurance
FN.3

IndustriesMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Insurance
FN-IN
Investment Opportunity Area

Farmer insurances

Business Model

Offer affordable insurance schemes for agricultural production and protect farmers against climate disasters that affect crop and livestock production.

Market Size (USD)Describes the value in USD of a potential addressable market of the IOA.
USD 100 million - USD 1 billion

The non-bank financial industry had 10 non-life private insurers in 2017. In 2017, the net profit after tax of private insurers in Rwanda was over USD 600,000. Total assets within the Rwandan insurance sector have grown over the years and reached almost USD 372 million in 2017, compared with USD 216.7 million in 2012.(5)

The insurance market is growing rapidly in Rwanda. Approximately 17% of adults (around 1.2 million people) have insurance products, increasing from 0.5 million in 2016.(7)

Even though the penetration of insurance products remains low, the FinScope 2020 survey showed 32% of adults in Rwanda had knowledge about agricultural insurance products.(7) Further, interest for insuring crops and livestock is increasing among farmers, with support from governmental plans and alliances with the private sector.

ROIDescribes an expected return from the IOA investment over its lifetime.
15% - 20%
GPMDescribes an expected percentage of revenue (that is actual profit before adjusting for operating cost) from the IOA investment.
5% - 10%

According to the East Africa Insurance Outlook Report, market leaders achieved profit margin between 5% and 10% in 2018.(8)

Benchmark statistics for the insurance subsector estimate a return rate between 14.4% and 18.4%. This rate is a benchmark calculated as a cost of equity with a country risk premium, reflecting an average return required by investors.(9)

TimeframeDescribes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Medium Term (5–10 years)

According to an active company in the sector in Rwanda, the timeframe is short to medium term. Specifically, estimates are 3 to 6 years to start getting positive returns, depending on the ability of scaling up the business.(10)

Average Ticket Size (USD)Describes the USD amount for a typical investment required in the IOA.
USD 500,000 - USD 1 million
Business - Supply Chain Constraints
Low availability of research facilitating choice, development of the right insurance products, limited scale of investments in infrastructure providing timely and credible weather indices (11)
Market - possible uptake delays
Training to develop an understanding of insurance products among rural households may be required over time.(12)
Inadequate pricing strategies in terms of the insurance premiums may arise.(12)
Market - High Level of Competition
Inadequate pricing strategies for insurance premiums may arise.(12)
Sustainable Development Need

The sector is predominantly characterized by small-scale, subsistence farming and traditional agricultural practices as well as rain-fed agriculture. The sector is exposed to climate shocks.(13)

Only 1% of farmers have agricultural insurance, despite 63% claiming to have experienced a crop failure or loss of livestock.(6)

Gender & Marginalisation

Only 45% of women in Rwanda have accounts at financial institutions or with mobile money-service providers, compared with 55.7% of men.(4) Therefore this investment opportunity area is relevant to bridge the gender gap relating to access to financial services.

Expected Development Outcome

Reduced vulnerability to external shocks for farming communities, improved income stability for farmers, increased safety net for farmers and small producers

Improved market intelligence and accelerated transformation of the agriculture sector

Reduced poverty levels and risks for farmers to hazards, incentivizing further investments in their crops and productivity; decreased accessibility gap to insurance

Gender & Marginalisation

Investments could bridge the gender gap in insurance access, helping female farmers build resilience against shocks.

Primary SDGs addressed
1 - No Poverty
No Poverty (SDG 1)

1.5.2 Direct economic loss attributed to disasters in relation to global gross domestic product (GDP)

Current Level

Houses damaged: 15,910 Crops ha: 13,337.21 Livestock: 815 Classrooms: 73 Health centers: 3 Roads: 32 Churches: 27 Bridges: 64 Administrative buildings: 12 Water supply: 1 Transmission lines: 26 (30)

Target Level

N/A

8 - Decent Work and Economic Growth
Decent Work and Economic Growth (SDG 8)

8.10.2 Proportion of adults (15 years and older) with an account at a bank or other financial institution or with a mobile-money-service provider

Current Level

50.02% (31)

Target Level

100% (31)

Secondary SDGs addressed
2 - Zero Hunger
Zero Hunger (SDG 2)
10 - Reduced Inequalities
Reduced Inequalities (SDG 10)
12 - Responsible Consumption and Production
Responsible Consumption and Production (SDG 12)
Directly impacted stakeholders
People
Agricultural households with greater income security
Gender inequality and/or marginalization
Women involved in agriculture, vulnerable populations
Corporates
Farmers, financial institutions
Public sector
Agricultural bodies due to greater sector productivity
Indirectly impacted stakeholders
People
Society as a whole benefitting from more stable agricultural supply
Gender inequality and/or marginalization
Environment due to reduced negative agricultural practices
Corporates
Agribusinesses benefitting from more stable agricultural prices
Outcome Risks

Subsidized crop insurance may encourage moving crop production into marginal lands, which results in environmental risks that would not occur under regular circumstances.(14)

Incentives to use more inputs as average returns rise (14)

Incentives to use fewer risk-reducing practices and materials (14)

Impact Risks

Execution risk in case activities are not delivered as planned due to weak legal and regulatory frameworks

Unexpected impact risk because environmental degradation may accelerate with increasing agricultural activity

What

Providing affordable, agricultural insurance schemes protecting farmers against production loss and strengthening their income stability.

Who

Agricultural households and crop and livestock farmers who will benefit from having insurance schemes, incentivizing further investments and development in their agricultural production.

Risk

Insurance schemes may turn out to be too expensive for the agricultural households. However, their successful uptake may provide farmers with incentives to use fewer risk-reducing practices.

Impact Thesis

Sustain financial liquidity for farmers who are affected by natural disasters or unpredictable weather patterns.

Policy Environment

National Agriculture Policy 2018: This policy emphasizes that sustainable development of agriculture relies largely on improved farmer resilience to production and market risks. Risk transfer, through agriculture insurance, has been identified as a main factor to increase that resilience.(16)

National Agriculture Policy 2018: Under this policy, efforts will continue to focus on improving the enabling environment e.g. through enhancing access to information for both farmers and potential insurers to build awareness and better estimate the risks.(16)

National Agriculture Insurance Scheme (NAIS): This scheme was implemented to mitigate risks and losses incurred by farmers due to natural disasters, pests or diseases. As a result of the scheme, the Rwandan government subsidizes 40% of total insurance costs.(17)

Vision 2050: Increased access to agriculture finance and risk sharing facilities are one of the priorities for the wealth creation in agriculture. Better insurance and financial services will reduce losses from the impacts of weather and climate change in the future.(18)

Private insurance providers, investors and the government are working on a blended finance scheme to provide affordable insurance to farmers.(10)

Financial Environment

Financial incentives: The government subsidizes the value of the premium up to 40% for agroinsurance.(25)

Fiscal incentives: The government waives value added tax and withholding taxes for weather-based index insurance.(26) Capital gains are tax exempt. For investments equivalent to at least USD 50 million, investors receive with a corporate income tax holiday of up to 7 years. All investors can enjoy a preferential corporate income tax rate of 15%.(26)

Other incentives: Rwanda offers an accelerated depreciation rate of 50% over the first year of operations.(26)

Regulatory Environment

Insurance Regulation 5/2009: This regulation provides a detailed framework for licensing requirements, fit and proper requirements, reinsurance, actuarial requirements, regulatory reporting requirements, solvency, risk management, etc.(19)

Regulation N° 2310/2018 - 00014[ 614] of 27/12/2018 on Licensing Conditions for Insurers and Re-Insurers: This regulation establishes the requirements and procedures for licensing private insurers and re-insurers.(20)

Regulation Nº 10/2017 of 19/05/2017 Determining Key Facts Statement and Information Disclosure for Insurance Products: This regulation requires insurers disclose key terms and conditions to consumers, enhancing competition between insurers and fair functioning of the financial market.(21)

Regulation No 2100 /2018 – 00012 [614] of 12/12/2018 of the National Bank of Rwanda Governing the Organisation of Microinsurance Business: This regulation governs microinsurers, protects microinsurance consumers and establishes a framework to promote and develop microinsurance business in Rwanda.(22)

Regulation of the National Bank of Rwanda No 03/2017 of 22/02/2017 on Administrative and Pecuniary Sanctions Applicable to Insurers: This regulation specifies administrative and pecuniary sanctions for violating the law on the organization of insurance business; regulations, instructions, directives and decisions of the Central Bank.(23)

Regulation Nº 11/2017 of 23/11/2017 on Corporate Governance, Risk Management and Internal Controls Requirements for Insurance Business (24)

Private Sector

Sonarwa General Insurance Ltd, Radiant Insurance Company, Prime Insurance Ltd

Government

Rwandan Ministry of Agriculture and Animal Resources (MINAGRI), Rwanda Development Board (RDB), Rwanda Agriculture and Animal Resources Development Board (RAB), National Bank of Rwanda

Multilaterals

OPEC Fund for International Development (OFID), World Bank (WB), European Investment Bank (EIB), African Development Bank (AfDB), KfW Development Bank, One Acre Farm, German Corporation for International Cooperation (GIZ), Agence Française de Développement (AFD)

Non-Profit

Food and Agriculture Organization of the United Nations (FAO), The World Agroforestry Centre (ICRAF)

country static map
rural
Rwanda: Eastern Province
With 626,000, the Eastern Province has the highest numbers of households employed in agriculture.(27)
rural
Rwanda: Northern Province
The areas most vulnerable to landslides and floods are located in the north-western part of the country, especially Nyabihu, Rubavu, and Musanze, Burera and Gakenke.(28)
rural
Rwanda: Western Province
Districts in the Eastern Province often experience severe droughts.(29)
Sector Sources
  • 1) United Nations Development Programme (2020). Sustainable Development Report 2020. https://unstats.un.org/sdgs/report/2020/The-Sustainable-Development-Goals-Report-2020.pdf 2) PwC/UNDP Interviews with private sector, 2020. 3) The East African (2017). Rwanda waives tax on agro-insurance. https://www.theeastafrican.co.ke/tea/rwanda-today/rwanda-waives-tax-on-agro-insurance--1363356 4) World Bank database. Global Financial Inclusion. 5) Ministry of Finance and Economic Planning (2018). Financial Sector Development Strategic Plan 2018-2024. 6) World Bank (2019). Rwanda Systematic Country Diagnostic. http://documents1.worldbank.org/curated/en/219651563298568286/pdf/Rwanda-Systematic-Country-Diagnostic.pdf 7) National Institute of Statistics of Rwanda (2020). Finscope Rwanda 2020. https://www.statistics.gov.rw/publication/finscope-rwanda-2020
IOA Sources
  • 8) Deloitte (2019). Insurance Outlook Report 2019/2020 East Africa. 9) PwC analysis based on Prof. A. Damodaran data, 2020. 10) PwC/UNDP interviews with private sector, 2020. 11) Vargas Hill, R. (2010). Agricultural Insurance In Sub-Saharan Africa: Can It Work?. Africa Agricultural Markets Program (AAMP). https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.185.1831&rep=rep1&type=pdf 12) Raithatha, R. and Priebe, J. (2020.) Agricultural Insurance for Smallholder Farmers. Digital Innovations For Scale. GSMA AgriTech Programme. https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2020/05/Agricultural_Insurance_for_Smallholder_Farmers_Digital_Innovations_for_Scale.pdf 13) World Bank (2015). Rwanda Agricultural Sector Risk Assessment. https://openknowledge.worldbank.org/bitstream/handle/10986/22936/Rwanda000Agric0ctor0risk0assessment.pdf?sequence=1&isAllowed=y] 14) Sumner, D. and Zulauf, C. (2012). Economic and Environmental Effects of Agricultural Insurance Programs. CFARE. http://ageconsearch.umn.edu/bitstream/156622/2/Sumner-Zulauf_Final.pdf 15) Ministry of Agriculture and Animal Resources. Agriculture and Livestock Insurance. https://www.minagri.gov.rw/fileadmin/user_upload/documents/Agricultural_Finance_Facilities/AGRICULTURE_AND_LIVESTOCK_INSURANCE.pdf] 16) Ministry of Agriculture and Animal Resources (2018). National Agriculture Policy. Republic of Rwanda. https://www.minagri.gov.rw/fileadmin/user_upload/webstore/National_Agriculture_Policy_-_2018___Approved_by_Cabinet.pdf 17) Ministry of Agriculture and Animal Resources (2019). National Agriculture Insurance Scheme. https://minagri.prod.risa.rw/national-agriculture-insurance-scheme 18) Ministry of Finance and Economic Planning (2015). Vision 2050. http://www.minecofin.gov.rw/fileadmin/templates/documents/NDPR/Vision_2050/Vision_2050_-Full_Document.pdf 19) Republic of Rwanda (2009). Insurance Regulation 5/2009. https://dfsobservatory.com/content/national-bank-rwanda-regulation-no-052009-licensing-and-other-requirements-carrying-out 20) Republic of Rwanda (2018). Regulation N° 2310/2018 - 00014[ 614] of 27/12/2018 on Licensing Conditions for Insurers and Re-Insurers. https://www.bnr.rw/laws-and-regulations/insurance-and-pension/insurance-laws-regulations/ 21) Republic of Rwanda (2017). Regulation Nº 10/2017 of 19/05/2017 Determining Key Facts Statement and Information Disclosure for Insurance Products. https://www.bnr.rw/laws-and-regulations/insurance-and-pension/insurance-laws-regulations/ 22) Republic of Rwanda (2018). Regulation No 2100 /2018 – 00012 [614] of 12/12/2018 of the National Bank of Rwanda Governing the Organisation of Microinsurance Business. https://www.bnr.rw/laws-and-regulations/insurance-and-pension/insurance-laws-regulations/ 23) Republic of Rwanda (2017). Regulation of the National Bank of Rwanda No 03/2017 of 22/02/2017 on Administrative and Pecuniary Sanctions Applicable to Insurers. https://www.bnr.rw/laws-and-regulations/insurance-and-pension/insurance-laws-regulations/ 24) Republic of Rwanda (2017). Regulation Nº 11/2017 of 23/11/2017 on Corporate Governance, Risk Management and Internal Controls Requirements for Insurance Business. https://www.bnr.rw/laws-and-regulations/insurance-and-pension/insurance-laws-regulations/ 25) The East African (2017). Rwanda waives tax on agro-insurance. https://www.theeastafrican.co.ke/tea/rwanda-today/rwanda-waives-tax-on-agro-insurance--1363356 26) Rwanda Development Board. Financial Services - Incentives. https://rdb.rw/investment-opportunities/financial-services/#incentives 27) National Institute of Statistics of Rwanda (2017). The Fifth Integrated Household Living Conditions Survey EICV5 2016/17. Thematic Report Environment and Natural Resources. 28) Nsengiymva, J.B. (2012). Disaster High Risk Zones in Floods and Landslides. https://www.preventionweb.net/files/28208_highriskzonesreportfinalpublication.pdf 29) Ministry of Disaster Management and Refugee Affairs (2015). The National Risk Atlas of Rwanda. 30) Republic of Rwanda (2019). Voluntary National Review Rwanda 2019. https://sustainabledevelopment.un.org/content/documents/23432Rwanda_VNR_Document__Final.pdf 31) Sachs, J., Schmidt-Traub, G., Kroll, C., Lafortune, G., Fuller, G., Woelm, F. (2020). The Sustainable Development Goals and COVID-19. Sustainable Development Report 2020. Cambridge: Cambridge University Press. https://dashboards.sdgindex.org/profiles/RWA 32) ACRE Africa (2021). ACRE Africa. https://acreafrica.com/