Small scale famers in Rwanda. The government plans to support the
expansion of insurance to the agriculture sector in a bid to attract
more players to the sector. PHOTO | CYRIL NDEGEYA | NATION
The Rwandan government will support expansion of insurance
packages to the agriculture sector in a bid to attract more players to
the sector.
This development could increase competition and lower premiums, making it more attractive for farmers to embrace take up.
Ange
Tambineza, the agriculture communication and information programme
manager at the Ministry of Agriculture said the implementation of an
agriculture insurance policy is on course.
While she did not say when the livestock insurance cover will be launched, Rwanda Today has learnt that it will most likely be commissioned in the second quarter of the year.
The crop insurance cover will be commissioned in September in agricultural season A.
“For
the livestock insurance policy, recruitment of staff for running the
project has been done. Insurance firms have been urged to express their
interest as negotiations with reinsurers is ongoing,” said Ms Tambineza.
Electronic chips
Currently,
plans for electronic chips for tagging animals and which will be used to
collect data automatically has reached the procurement stage.
According
to government officials, the plan is to tag 277,000 cattle with
electronic chips, which should help reduce risks for both financial
institutions and farmers.
Tagging cattle is meant to
provide insurers with accurate and timely information to calculate
premiums and enable lenders to price loans.
This comes
at a time when microfinance institutions have scaled down disbursing of
credit, signalling an urgency to de-risk lending to the agriculture
sector.
Data from the central bank shows that the
industry’s loan book shrunk to 2.9 per cent in the year ending December
2017, from highs of 14.9 per registered in December 2016, after the
profits of the industry dropped — constraining the lending capacity of
microfinance institutions.
The dip in credit
disbursement is attributed to the slowdown in economic activities in the
first half of last year. But, industry players blame the low uptake of
agriculture insurance in the country for the slowdown in lending by
microfinance institutions to the rural poor who are considered risky.
The
national multi-peril agriculture insurance policy has been on the cards
for years, but it has not been implemented exposing agriculture
investments to risk.
“At least 16.1 per cent of
microfinance institution’s loan portfolio is in agriculture. They should
be helped to continue lending,” said Jean Bosco Iyacu, programmes
manager at Access to Finance Rwanda.
Co-operation
Experts
are calling for combined efforts between governments, NGOs and insurers
to move agriculture insurance programmes beyond the pilot stages.
“Insurance
is promoted disproportionately and tends to be forgotten as a key risk
mitigation tool,” according to Access to Finance Rwanda.
Analysts
warn that they see lenders taking a conscious approach in credit
disbursement to reduce risk exposure after their earnings took a hit
last year.
The microfinance institutions reported high
growth in bad loan provisioning, which increased from Rwf5.7 billion
($6.5 million) in December 2016 to Rwf6.2 billion ($7.1 million) in
December 2017, eating up their capital levels, after farmers failed to
service the loans.
This means reduced capacity for
microfinance institutions to mobilise cheap deposits to lend to
smallholder farmers and low income earners.
This
explains the fresh capital calls from shareholders to shore up their
liquidity levels. The central bank says the microfinance institutions
sector got fresh capital injection of Rwf6.3 billion ($7.2 million)in
2017.
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