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We talk a lot about the types of technologies that are geared towards larger operations, but what’s out there that has the potential to really improve the lives of small farmers, especially of those in developing countries. We have a really interesting example of one of these innovations in this episode. Weather Risk Management Services is an India-based company that collects data to help producers manage their risks. The company started off as offering just crop insurance products, which is still a big part of their business, but they’ve also expanded into products that incentivize and reward farmers for using risk management strategies.
In other words, a farmer pays a premium and agrees to certain farming practices. In return they are provided a guaranteed yield, and paid if their yield drops below that threshold. This helps take away the risk of adopting new practices. Weather Risk Management Services has worked with over 30,000 farmers in India already, and hopes to grow to one million farmers in the next five years. Founder Sonu Agrawal joins us to share the process, goals and impacts of the company.
“So in many developing countries … not only in India, but several countries in Asia and Africa, there is very low or no access to crop insurance contracts. And since there is no crop insurance, access to finance is also a big challenge because banks do not lend money to small farmers. The banks are not covered against losses due to adverse weather events. So there is a complete lack of access to crop insurance.” Sonu Agrawal
Sonu shares that Weather Risk Management Services provides access to affordable crop insurance that also provides incentives to “the farmer to use better risk management practices.” These practices include things like using drought resistant seeds, applying additional nutrition to the crops or arranging irrigation to their fields. Satellite data helps to monitor these additional practices to make sure the crop is insured appropriately. Farmers then either benefit by way of a reduced premium or increased coverage based on a projected yield.
“Before we enter a village, a lot of analysis is done…..So we analyze and then identify the more important risks or the factors which have resulted in sub optimized yield. And then the whole production process, what we call the package of practices, is designed in such a way so that we can improve the yields gradually.” - Sonu Agrawal
Farmers are offered smaller contracts when they start with Weather Risk Management Services. This is done to overcome any trust concerns and allow producers to take advantage of the gradual increased yield at their desired pace. There is a lot of learning done by the farmers and the company to assess what yields can be expected and what measures can be taken for improvement in these initial smaller contracts. Sonu shares that in the first year of collaboration with a farmer they expect a 5-7% increase in yield, followed by 10-12% in the second year and up to 15-20% in the third year.
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