TheEconomistAugust 24th 2019 471L
ike many Zambian farmers, Stephen
Chomba suffered badly from a pro-
longed drought that started just after last
year’s planting season in October. The
maize seeds he had used in his little 12-
hectare farm in Chilanga, on the outskirts
of the capital, Lusaka, failed to germinate.
He risked losing his entire crop. Then, to
his astonishment, he received a phone-call
from the seed company. He was told he was
entitled to pick up replacement seeds at no
cost. He was, it turned out, insured.
His story shows how technology and
new ideas can bring insurance to poor peo-
ple around the world—but also how diffi-
cult that task is. Moves to expand “financial
inclusion” are being extended to bring the
poor insurance as well as mobile-money
accounts and access to credit.
It is the very poor who need insurance
most of all, and as climate change makes
extreme weather more common, poor
farmers are likely to find themselves ever
more vulnerable. Mr Chomba has seven
children to support, five of them still at
school. For such families a loss like the one
he faced is much more than a temporarysetback. It can tip them into crippling debt
or utter destitution. But most poor people
around the world assume that insurance is
not for them. Indeed, if they think about it
at all, many wonder why they would pay
money now, a premium, for something
they hope never to need, a claim for some
unforeseen loss.
Since 2011 the World Bank, with funding
from the Bill and Melinda Gates Founda-
tion, has produced a financial-inclusion
index, or “Findex”, an attempt to measure
access to financial services. Included in the
most recent Findex, covering 2017, was a
survey of farmers across a range of poorer
countries. About half had experienced at
least one very bad year in the past five. The
vast majority had borne the entire financial
risk of the loss, receiving nothing from ei-
ther an insurance payout or government
assistance (see chart on next page).
In India, for example, many poor farm-
ers have no insurance, says Shree Kant Ku-
mar, of Vimosewa, the insurance arm of
sewa, a women’s union and microfinance
provider. “Most insurance is either subsi-
dised or forced,” he says. Based in Ahmed-abad, in the state of Gujarat, Mr Kant says
that in the 1980s sewanoticed that some of
the women to whom it had lent money
were unable to repay because a calamity
had befallen them. So in 1992 it started of-
fering life insurance, adding health insur-
ance in 2000.
The government also offers a crop-in-
surance scheme, which is subsidised. But
this is available only to farmers who take
out loans through co-operatives, and tend
to be relatively well-off. Mr Kant says Indi-
an small farmers cover their risks as their
ancestors did—by hoarding produce and
having more children, to look after them,
they hope, when they are old.A lose-lose policy
Among a group of rice-farmers in the vil-
lage of Jalalpur are some who have dabbled
with insurance, thanks to the government-
subsidised scheme. Some complain it did
not pay out despite terrible harvests in
2015-16. Others have had no claims, and re-
sent paying premiums and getting nothing
back. Indeed, sewahas now begun to pay
no-claims bonuses to people who do not
submit a claim for several years.
In Zambia Mr Chomba did recall that,
when he bought his seeds, the salesman
had mentioned insurance. But he had as-
sumed it was just part of his patter. In fact,
in giving his mobile-phone number he had
registered for insurance. It covered only
non-germination, and paid out only in
seeds. The extended drought left him with
a crop about one-fifth of a normal year’s.Insurance and the poorUnder cover
JALALPUR AND LUSAKA
Insurance is most useful for the very poor. How can they be persuaded to buy it?International