January 28, 2018.- Farming is an uncertain and risky business, especially for poor smallholders in remote areas of developing countries. However, a new study shows how data gathered by satellite could help poor farmers manage their risks more effectively through index insurance.
The Weather Risk Management Facility (WRMF), created by the International Fund for Agricultural Development (IFAD) and the World Food Programme (WFP), conducted a project in Senegal from 2012 to 2016 to test whether remote-sensing technology could advance the drive to make insurance available to smallholder farming households. The project received financial support from the Agence Française de Développement and an additional contribution from the Belgian Federal Science Policy Office.
Index insurance, a type of agricultural insurance, uses data rather than in-field assessment to determine when crop losses occur. The new WRMF study focused on developing and testing indices using satellite data - obtained through remote sensing – to try and overcome challenges with only using data on the ground. The indices would then be used in an index insurance contract to protect against drought or other production risks. Using this data, a yield loss could be captured automatically, triggering payouts.
As global population and the demand for food continue to rise, it is essential to support the world’s 500 million smallholder farms, which are responsible for much of the food produced in developing countries. Though they make a big contribution to global food security, small farmers have difficulty developing sustainable practices as climate conditions change. Too often they lack the knowledge, access to credit or other financial tools necessary to invest in adapting to climate uncertainty and they struggle to maintain yields or increase productivity.
The project, Improving Agricultural Risk Management in Sub-Saharan Africa: Remote Sensing for Index Insurance, explored ways in which the construction of dependable index insurance products would help these smallholder farms to manage risks related to climate. The publication describes the project in detail, and will give people working in insurance, agricultural development and government an overview of how remote sensing can assist index insurance and the hurdles to be overcome, as well as recommendations on where further work and investment is needed.
Rural areas are hampered by lack of infrastructure. In developing countries, ground-based weather stations are scarce. Collecting accurate, usable data using conventional methods would require a substantial amount of new infrastructure, including new roads and weather stations. Yet lack of data limits the development of insurance in smallholder agriculture. Remote sensing, which does not need ground-based infrastructure, could make data collection easier and render index insurance for smallholders more viable.
The WRMF study, the first of its kind, brought together a diverse group of actors to assess the accuracy of many different types of remote sensing and to identify options that could underpin index insurance. Remotely sensed indices do not take direct measurement on the ground. Instead, satellites collect different types of datasets based on specific biophysical dynamics, such as cloud temperature to estimate rainfall, evaporation and transpiration of water from the soil/plant system (evapotranspiration), soil moisture content or vegetation greenness. These data are typically calibrated with some ground information to create indices. The project worked with seven remote sensing service providers to develop indices for maize, groundnuts and millet.
Index insurance can circumvent the costly journeys and arduous, long-term loss assessments that prevent insurance providers from offering coverage to rural farms, thus lowering administrative costs, making it affordable and accessible to smallholder farmers. Using remote sensing technology to develop index insurance with accurate data could enable efficient payouts to rural farmers. With further investment and research, satellite data could transform agricultural insurance and help it become a valuable risk management tool for smallholder farmers in developing countries.
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