Many banks also shy away from lending to the agricultural sector and even when they do, it is at higher interest rates.

It is againts this background that agricultural insurance was inroduced to address some of these challenges, most of which are beyond the control of the farmers.

Role of agric insurance

Formerly, there was no coverage for farmers to enable them to invest in potentially more lucrative farm activities.

However, in 2011 stakeholders in the insurance industry came together under the auspices of the Ghana Insurers Association (GIA) to form the Ghana Agriculture Insurance Pool (GAIP) which is mandated to supply agric insurance products to farmers.

In an interview in Accra on March 1, 2017, the General Manager of the GAIP, Mr Ali Mohammad Kato, said agric insurance was a specialised area and that the GAIP was working with support of GIA, USAID, ADVANCE and others to provide insurance for smallholder famers, commercial farmers and another product for poultry farmers.

Challenge

He said there are challenges from the demand side and suppler side which agriculture insurance comes in to solve.

Mr Kato said Ghana mainly depended on rainfall agriculture and climate change has also brought about erratic rainfall pattern which made drought eminent and all of these tend to have impact on farmers production and access to credit.

“If you take a facility from a bank and you suffer a drought, how do you go back to repay the loan? The recovery should be rescheduled and which comes at another cost but I should have agric insurance which is taking care of the production and loss of yield then I will be in business and if I am a smallholder my income will be protected,” he said.

He said agriculture insurance could again influence the interest rate which the bank is charging because some of them risk may have been mitigated with the presence of agriculture insurance.

Impact GAIP’s intervention

He admitted although it had made some inroads, there was still room for improvement.

“We need more publicity. Awareness creation is key. Marketing to get the product to the people is a challenge and the people’s appreciation, accepting it as a risk mitigation tool is a challenge. So we are trying to move with the financial institutions so that whatever credit facility they are given, there should be agric insurance component to improve recoveries,” he said.   

Claims under GAIP

About 140 farmers mainly in the Northern and Upper regions received claims under the Drought Index Insurance production in October 2012.