Few livelihoods offer as many paths to failure as agriculture. Throughout history, farmers have been at the mercy of nature — be it weather, pests or crop diseases — even as the survival of people and livestock depended on their success.
Growing up on a farm on the slopes of Mount Kenya, Thomas Njeru witnessed firsthand the devastating impact such setbacks had on the lives of small landholders, including his own family. His mother lectured him to work hard in school so he could one day leave the farm and land a good job in the city. Njeru followed that advice obediently — until he did not.
Today, he is a co-founder and chief financial officer of Pula, a four-year-old microinsurance firm that serves 1.7 million smallholder farms of 0.6 acres or less in 10 African countries and India.
Microinsurance — think of it as an offshoot of the microloan programs that kick-start businesses in impoverished areas — provides protection for low-income individuals who do not have access to conventional coverage.
Pula, based in Nairobi, Kenya, partners with government agencies and loan providers to cover the cost of the insurance, which is included in the price of seed and fertilizer; there is no direct charge to the farmer.
Among the coverages Pula provides is weather index insurance to cover failures of seed germination, using satellite data to determine whether there has been sufficient rainfall. Longer-term coverage, called yield index insurance, compensates farmers with replacement supplies in the event of a poor harvest.
The coverage is registered using a mobile app — already a prevalent method of transactions in much of Africa — at the farm supply dealer. Rather than settling claims with an adjuster making a traditional field visit, Pula automates the payout via text messaging.
Globally, microinsurance is a $64 billion market, but it has been slow to catch on in Africa because of logistical hurdles: Farms are tiny and often hard to reach; claims are a challenge to verify; cost is too high for subsistence growers.
Yet some of the same technology that is improving efficiency and crop yields on large farms — powerful data acquisition and satellite-enabled weather forecasts, for example — can be deployed in the developing world, using proven strategies like risk sharing across large insured groups and a nonprofit structure.
The following conversation has been edited and condensed.
Q: What would you like people to know about your work?
A: If you would have told me 10 years ago that I would be running a company that does agriculture insurance, I would not have believed you. Agriculture has not been an area that people have invested in across Africa. Many of my cousins and childhood friends still work on their farms, but they are reluctant to invest, putting in only what they can afford to lose.
The reason they don’t invest is simple. The chance of them losing their money due to the vagaries of the weather is huge. Working in insurance got me to understand about probabilities of loss early on — probabilities that cause our continent to be food insecure.
Pula’s mission is to give farmers confidence by providing risk mitigation. Our solutions protect a farmer’s investment by pairing it with insurance. We build business cases to persuade Fortune 500 companies, seed and fertilizer suppliers, lending institutions, and governments in Africa that embedded insurance will help deliver better results for both businesses and food security.
Q: Who or what inspired you to go into your field?
A: The sad reality is that farmers are one drought or one disease outbreak away from sliding into absolute poverty. I remember during a drought year some of my friends dropping out of school — they could not come to school hungry, and their parents could not pay the school fees. The majority of families in Africa are faced with the same precarious reality.
When I began working in the insurance sector as an actuary, I realized that insurance companies in Africa largely overlooked agriculture. In fact, the penetration of agriculture insurance in Africa is less than 1%. The reason is that insurance companies’ business models are not set up to serve the unique needs of smallholder farmers. I saw an opportunity to develop a new approach that could support the vulnerable smallholders.
Q: What obstacles do you face in your field?
A: Attracting great talent is a challenge for startups. The majority of talented people in Africa prefer to work for established corporations rather than take a career risk at a startup like ours.
Getting buy-in to the concept of insurance in Africa is a challenge due to low trust levels. Driving behavior change toward adopting insurance is also difficult, especially in the rural and poor households where farmers are faced with many competing demands on their finances.
Q: How do you define success?
A: At a personal level, success will be when my mother buys an insured bag of fertilizer or seed and gets a payout should she suffer an adverse event. At a macro level, success for us will be when every farmer in Africa has access to insurance. I hope that this happens in my lifetime.