As simple as agriculture appears, it is a risky business. It is more than just putting seeds in the ground and waiting for them to sprout. Currently, the sector has become vulnerable to many risks; it is still recovering from the blow dealt by the pandemic, natural disasters are common, and the effects of climate change are prevalent. The experience of Nigerian crowd-funding platforms, whose projects were affected by the pandemic, highlights how risky agriculture is. As a result of the pandemic disruption, the once-lauded innovative agricultural financing system became associated with Ponzi schemes and fraud.
Agriculture is fraught with unpredictability. Farmers suffer massive losses on their investments and have no way of returning to production. These risks should be mitigated in Africa since agriculture remains critical to the economies of many African countries; it is a driver of growth, a pillar of food security, and a source of employment. It accounts for approximately 23 per cent of Sub-Saharan Africa’s GDP, and as of 2020, 43.8 per cent of employment in Africa was in the agricultural sector. Hence, a risk management mechanism like agricultural insurance is a necessity. Sadly, insurance penetration on the continent is lagging. The total insurance penetration stood at 2.78 per cent in 2019, far below the global average of 7.23 per cent. In Nigeria – the most populous African country and largest economy, the insurance penetration rate is 0.5 per cent.
Worse, there is a significant gender gap in insurance access and utilization. This disparity is also evident in the agricultural insurance space. In Africa, women constitute above 40 per cent of agricultural labour, and this number rises to 70 per cent in some countries. Women play a vital role in the sector, and logically, a higher number should result in higher output, but this is not the case. It is concerning to learn that this low level of productivity is not due to inefficient farming on the part of women, but rather to gender discrimination in terms of equitable distribution and access to agricultural resources. Unlike their male counterparts, women farmers do not have equal access to land, labour, credit, key agricultural inputs, technology, insurance, etcetera. This makes women more vulnerable to risks.
Per available data, women are underserved by the insurance sector. In a broader context, there is a persistent 7 per cent gender gap worldwide in bank account ownership, and this number rises to 11 per cent in low-income countries. Interestingly, if this gender gap is closed, the insurance industry will earn up to $1.7 trillion by 2030 – half of it in emerging economies, according to the International Finance Corporation. With such potential, one wonders why the market remains largely untapped.
Insurance in agriculture presents a case of the satirical Animal Farm, where all animals are equal, but some are more equal than others. Many existing insurance companies are unaware that their mode of operation contributes to the gender gap in insurance usage. “When we talk to insurance companies, they say insurance is for everyone. They don’t think of customers as men or women. They see customers as customers. They don’t realize women are different,” said Sarah Ebrahimi, operations officer for the Women Insurance Programme at International Finance Corporation.
First, there must be the acknowledgement that there is a deficit in insurance penetration amongst women. Women’s insurance needs vary depending on their income, location, marital status, and employment. But while their needs may be wide apart, constraints in accessing and using insurance are uniform to an extent. Many women face cultural, religious, and legal barriers that hamper their access to risk management and financial services.
For example, legal gender differences in access to identification documents may hamper a female customer’s access to insurance since registration requires it. Women are said to be 9 per cent less likely than men to have an I.D. in Sub-Saharan Africa, according to Global Findex-ID4D data. “We need to be thinking about how insurance can fit in the lifestyle that women already have. We realized no one is offering insurance for women farmers in Nigeria. We need to understand how insurance companies can tackle this problem,” Ebrahimi said.
Furthermore, many low-income women in emerging markets are either unfamiliar with insurance or do not fully comprehend what it entails. As Ebrahimi stated, “women are information gatherers,” and there are already pervasive misconceptions about insurance. One is that insurance is expensive; it is only for the rich, and the system is rife with fraud and default issues.
Ultimately, there is a distrust of insurance companies. One of the ways to improve trust is to change the sales process for female insurance clients. Ebrahimi foregrounds that “insurance sales agents need to build relationships. Women are relationship builders and are also information seekers. They want to take their time when making decisions. Sometimes, women requests to go home and talk with their partners, but it is not really because they want to talk to them. They need time to reflect on what they have heard, read through everything, and maybe talk to people they trust to get their opinion on insurance. When a woman feels she has the right amount of information, she can come back to the salesperson and re-engage.”
When trust is earned, a happy female customer becomes the best brand ambassador for insurance companies. Women who have benefited from insurance are more likely to influence other women to get insurance. Research shows that, on average, women make 26 referrals over their lifetime to their financial advisors – more than twice the average of 11 referrals made by men.
In getting insurance to women farmers, it is pertinent for insurance companies to partner with governments and non-governmental organizations in the agricultural sector as this further helps improve trust. Women farmers have existing co-operatives and organizations they belong to where they receive information and support for each farming season. Building on these systems of trust would help insurance penetration. Women farmers are more assured that if the organization they initially belong to can partner with insurance companies, then it is good for them. Insurance companies need to identify reliable partners to provide embedded insurance services for women farmers.
The International Finance Cooperation works with insurance companies to help them build partnerships with organizations that women already trust. According to Ebrahimi, “even if women farmers don’t initially trust the insurance company, they trust their private network. What is important is that insurance companies are designing new solutions for women.”
For insurance premiums, insurance companies should look into collaborating with other financial services providers to ease the burden on women farmers. Women find paying for premiums preferable and convenient at the end of the planting season and not at the start of the season. They want to be pre-financed by the bank. Because farms are mostly located in remote locations, women find it difficult to access financial services. “If insurance companies can have products available through remote networks, like saving groups, or microfinancing institutions that women are already with, women that are otherwise hard to reach would be easily reached,” Ebrahimi stated.
Women need insurance to help them have more stable lives and incomes. Being insured makes it easier for women farmers to take out loans, buy improved agricultural inputs and do business easily with other value chain actors. When a loss or damage occurs, insurance payouts can be reinvested to help with the recovery process. Of the 10 emerging markets that the IFC studied in a report, Nigeria had the second highest expected growth rate for women’s insurance. Closing the gender divide in Nigeria’s agricultural sector through insurance coverage is pivotal to fighting hunger and poverty, tackling malnutrition, and ensuring food security for its teeming population – projected to grow to more than 400 million by 2050.
