improving weather index insurance for smallholder farmers in ghana


Agriculture in the Sub-Saharan African countries (including Ghana) is mainly rain-fed and it is also dominated by smallholder farmers (with farm size less than 2 hectares). This implies the smallholder farmers who are the most vulnerable group in the society are always under the mercy of the weather. The effects of climate change which is causing erratic rainfall patterns has compounded the already precarious situation. It had made the smallholder farmers less resilient to the shocks of climate change such as drought and excess rainfall, the delayed patterns of the rains, etc.

The smallholder farmers who mostly live in the rural communities are far and scattered. This coupled with the above stated effects of climate change makes one draws the conclusion that  agriculture production is perceived as high risk and therefore the smallholder farmers could not have access to insurance and credit.

The Smallholder farmers also need to transfer such risks they face, have access to critical services such as credit and agricultural inputs and peace of mind, in order to improve upon their welfare. The insurance will also help in reducing the rural- urban migration with its attendant social problems on the economy of the country.

To serve this marginalised market and grant them access to insurance, the global approach was the development of parametric insurance which sets and index (such as rainfall, yield, etc.) based on which payouts could be made to the farmers in the event of loss of yield to the measured index. The index selected must have correlation with the yield.

Weather Index Insurance (for drought) was introduced in Ghana in 2011 by the Ghana Agricultural Insurance Pool (GAIP) under the auspices of the Ghana Insurers Association (GIA). This was started in the former three regions of the North (Upper East, Upper West and Northern Regions) as indicated in the map below, where drought is one of the main challenges of agricultural production. One of challenges of the Weather Index Insurance is the basis risk which is the mismatch between the actual loss of the farmer and what is determined by the proxy

In Ghana, more methods had been employed to improve on the quality of the product with regards to the reduction of the basis risk which is the products major challenge. The use of ground stations for the rainfall data (which requires the farm to be within 20 km radius) had some challenges such as the density of the ground stations as well as some ground stations being far away from the farms. That had a high adverse effect on the basis risks.

The use of satellite data with a 10 km by 10 km pixels had been used to reduce the basis risk (associated with the Weather Index Insurance). That brought about improvement of the product and also made it possible to cover more farmers who were not located within 20km radius of a ground stations. The use of THAMO ground stations is also an improvement of the cover. That had argument the density of ground stations.

Research is still ongoing (under the TWIGA PROJECT) with the main aim of reducing the basis risk - The use of Soil Index as one of the parameters to determine the triggers for the payouts under the Weather Index Insurance. THAMO had installed Soil Index Sensors in some parts of the country. The data from these sensors will be incorporated as another parameter to improve upon the triggers for the determination of the payouts.

That will further improve upon the quality of the Weather Index Insurance so that it will serve the smallholder farmers better and give them the peace of mind provided by insurance in the “bad years.

The Former three Regions of the North – Upper East, Upper West and Northern Regions. The blue Circles indicate the location of Ground Stations then.

The Team from Ghana Agricultural Insurance Pool –GAIP (Ali Muhammad Katu and Evelyn Rose Debrah) recently paid a working visit to Kumasi and Tamale Site of THAMO where Soil Index Sensors are installed. In the pictures above, Mr. Kwame Ohene Duah of THAMO sharing some points with the Team at THAMO Site in Kumasi – Ghana (at the end of the blog)

This project has received funding from the European Union’s Horizon 2020 Research and Innovation Programme under grant agreement No.776691. The opinions expressed on the web page are of the authors only and no way reflect the European Commission’s opinions. The European Union is not liable for any use that may be made of the information.