Insurance Solutions for Smallholder Farmers

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Insurance Solutions for Smallholder Farmers
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

Invest in insurance solutions (to not exceed 7.5% of daily minimum wage for premiums and charges) for low-income and vulnerable smallholder farmers. This model incorporates an efficient claims-processing system, through physical and digital platforms, thereby increasing access, and automatically initiates payouts when predefined index triggers are met.

Product design, after-sales service of insurance products for smallholder farmers can be implemented in partnership with intermediary organizations like microfinance service providers.

CARD Bank, Inc. is a microfinance bank that was founded in San Pablo City, Laguna on September 1, 1997. It has since grown to become a nationwide financial institution with 54 branches and 329 Micro Banking Offices (MBOs). CARD Bank serves over 900,000 clients across the country and has recently partnered with Cebuana Lhuillier in the inclusion of microinsurance as part of a requirement for small-scale agricultural financing. While the current coverage is small, there's significant growth in the market for those areas that have proven the viability of claims in case of calamity.

Sureserv is a Filipino microfinance service provider that helps working-class Filipinos pay for healthcare. It aims to fill the healthcare access and convenience gap by providing loans to working-class Filipinos so they can afford the healthcare they need and has helped employees from manufacturing, manpower, retail, SME, and BPO companies.

ASA Philippines is a non-profit, non-stock corporation specializing in microfinance. The first branch that the foundation started with was in Camarin, Caloocan in August 2004, and as of today, the foundation has already expanded its operations nationwide. The foundation caters to more than 2 million clients who are called by ASA as Micro Entrepreneurs.

The "Weather Index-Based Insurance (WIBI) Mindanao Project," an initiative implemented by the UNDP in partnership with the Philippine government (specifically PCIC and the Department of Agriculture) from 2014 to 2017, aimed to address climate-related risks in agricultural communities in Mindanao, focusing on Regions X and XI. The program offered insurance coverage for major grain crops, particularly rice, against both low and excess rainfall. By the end of 2015, the project had distributed weather index-based insurance to 837 enrolled farmers, covering approximately 961 hectares and amounting to around Php 19.19 million payouts.

Expected Impact

Providing improved financial security to poor families within the agriculture industry through microfinancing and microinsurance products.

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).
5% - 10% (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.
Short Term (0–5 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) Gender Equality (SDG 5)
Sector Sources
  • 1) Philippine Statistics Authority. (2022). Compendium of Philippine Environment Statistics: Component 4. https://psa.gov.ph/content/compendium-philippine-environment-statistics-component-4 2) Rivera, D. (2023, January 17). Weather disturbances leave P746 million agriculture damage. Philippine Star. https://www.philstar.com/nation/2023/01/17/2238087/weather-disturbances-leave-p746-million-agriculture-damage 3) Asian Development Bank. (2022). Testing Public–Private Partnership in Crop Insurance to Boost Filipino Farmers’ Resilience. https://www.adb.org/news/features/testing-public-private-partnership-crop-insurance-boost-filipino-farmers-resilience 4 NEDA. Philippine Development Plan 2023 to 2028 https://pdp.neda.gov.ph/philippine-development-plan-2023-2028/ 5) BSP. Financial Inclusion Dashboard. https://www.bsp.gov.ph/Media_And_Research/Financial%20Inclusion%20Dashboard/2021/FIDashboard_2Q2021.pdf 6) PIDS. Distinct Problems in Supporting Inclusive Development Access to Credit. https://cids.up.edu.ph/wp-content/uploads/2021/11/EMIT_Article-2021-3.pdf#:~:text=Access%20to%20credit%20presents%20a%20distinct%20problem%20for,existing%20credit%20arrangements%20to%20support%20inclusive%20development%20goals.
IOA Sources
  • 7) Official Gazette. (2013). The Insurance Code. https://www.officialgazette.gov.ph/2013/08/15/republic-act-no-10607/ 8) Supreme court. RA 8425. https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/2/4057 9) Insurance Commission. (2015). Circular Letter 2015-53. https://www2.insurance.gov.ph/wp-content/uploads/2017/02/CL2015_53.pdf 10) Official Gazette. (2015) https://www.officialgazette.gov.ph/2015/11/03/republic-act-no-10693/ 11) Insurance commision (2015). https://www.insurance.gov.ph/circular-letter-2015-54-adoption-and-implementation-of-enhanced-microinsurance-regulatory-framework/ 12) Insurance Commission. (2013). Circular Letter 2013-16. https://www.insurance.gov.ph/circular-letter-2013-16-guidelines-for-the-implementation-of-alternative-dispute-resolution-mechanisms-for-microinsurance-adrem-involving-mutual-benefit-associations/ 13) Insurance Commission. (2013). Circular Letter 2013-17. https://www.insurance.gov.ph/circular-letter-2013-17-guidelines-for-the-implementation-of-alternative-dispute-resolution-mechanisms-for-microinsurance-adrem-involving-cooperative-insurance-societies/ 14) Insurance Commission. (2013). Circular Letter 2013-18. https://www.insurance.gov.ph/circular-letter-2013-18-guidelines-for-the-implementation-of-alternative-dispute-resolution-mechanisms-for-microinsurance-adrem-involving-commercial-insurance-companies/ 15) Insurance Commission. (2013). Circular Letter 2013-15. https://www.insurance.gov.ph/circular-letter-2013-15-procedures-for-accreditation-of-mediators-conciliators-in-alternative-dispute-resolution-for-microinsuranceadrem/ 16) International Labour Office. (n.d.). A field study of microinsurance in the Philippines. https://www.ilo.org/wcmsp5/groups/public/---ed_emp/documents/publication/wcms_117980.pdf" 17) DoF, (2022). https://www.insurance.gov.ph/wp-content/uploads/2023/03/Q4-2022-Consolidated-Insurance-Industry-Performance-Report.pdf 18) DA (Department of Agriculture, Philippines). 2022. National Agriculture and Fisheries Modernization and Industrialization Plan 2021-2030: Transforming the Philippine Food System Together. Philippines: DA https://www.bfar.da.gov.ph/wp-content/uploads/2022/08/06232022_NAFMIP-2021-2030.pdf 19) AgroInsurance, (2017). Philippines - Binhi Micro-Crop Insurance Program https://agroinsurance.com/en/philippines-binhi-micro-crop-insurance-program 20) Insurance Commission, (2018). A Handbook on Microinsurance. https://www.insurance.gov.ph/wp-content/uploads/2022/08/MicronInsurance-hand-book.pdf 21) Sacdalan-Pateño, (2022). sedpi.com/en/philippine-microfinance-industry-estimates/#:~:text=Players%2C%20portfolio%20and%20number%20of,microfinance%20institutions%20in%20the%20Philippines. 22) Rapisura, V. G. (n.d.). Philippine Microfinance Industry Estimates. Retrieved July 6, 2023, from https://vincerapisura.com/philippine-microfinance-industry-estimates/#_ftnref10 23) Insurance Commission, 2022  https://www.insurance.gov.ph/as-of-the-quarter-ending-31-march-2022/