For over two decades, Robert Baguma, a farmer in Uganda’s Kigorobya sub-county, tilled his land with determination. However, returns rarely matched his effort.
Seasons came and went with uncertainty, too little rain, then too much, and each cycle seemed to chip away at both his yields and his hope. However, that changed four years ago when he decided to sign up for drought index insurance.
“I used to make losses, but now I can farm comfortably without having to worry about the losses,” Baguma recalls, his voice steady but reflective.
Today, his tobacco and maize fields are insured, and with that safety net in place, he is planning beyond survival. “I am now developing gradually, and my household income is increasing. Even when I make a loss, insurance is there to cover me,” he said.
Hundreds of kilometres away in Isingiro District, where long dry spells are a recurring threat, Laban Kanywa tells a similar story of transformation from hardship to adaptation. He had endured years of losses that undermined his confidence in agriculture.
“I was making huge losses in my farming business. Then in 2017, a friend visited me, saw what I was going through, and introduced me to insurance. That marked a turning point. Since then, I have consistently insured my crops, mainly beans and peas, and the impact has been tangible,” Kanywa says.
“I am no longer worried about losses since I insure my crops. I have even been able to buy extra land from the compensation I have been receiving,” he explains.
Kanywa now urges fellow farmers to consider the same path, stressing that farming is unsustainable without insurance.
How drought index insurance works
According to John Makosya, a senior consortium officer at Agro Consortium Uganda, drought index insurance is an innovative crop insurance product under the Uganda Agriculture Insurance Scheme (UAIS).
Through the drought index insurance scheme, he says farmers can access protection at highly subsidised rates, paying as little as 2.75% of the insured crop value, with the government covering up to 50%-80% of the premium depending on the level of risk.
“The system uses satellite data to trigger automatic payouts when weather conditions fall outside the optimal range for crop growth, meaning farmers do not have to file claims, and all insured farmers within a sub-county receive equal payouts,” Makosya added.
He explained that the insurance also covers a wide range of crops, including maize, beans, coffee, cotton, tea, rice, bananas, Irish potatoes, oilseeds and various horticultural crops.
“Additionally, farmers can also insure input costs such as seeds, fertilisers and labour, as well as expected crop yield based on acreage, average output and prevailing market prices,” Makosya said.
Under the scheme, small-scale farmers are classified as those operating on less than five acres or earning below UGX20 million (about US$5,400) per season. Large-scale farmers, on the other hand, are those with five acres and above or earning more than UGX20 million, ensuring the product is tailored to different farming capacities.
Climate risks rising
The rising climate risks are undermining productivity and food security, making agricultural insurance a tool that can encourage farmers to invest in improved production methods while cushioning them against losses.
Dr Alhaj Kaddunabbi Ibrahim Lubega, the CEO of the Insurance Regulatory Authority (IRA), described recent reports of widespread crop losses as saddening in a country where agriculture underpins the economy.
Despite agriculture contributing about 24.1% to gross domestic product and about 33% of export earnings, insurance adoption remains low, leaving farmers exposed to floods, landslides and pest invasions.
“Uganda is predominantly an agro-based economy. This loss is not only for farmers but the entire country. Everyone shall be affected through rising food prices,” Kaddunabbi said, referring to recent reports of maize crops scorched by dry spells.
He noted that food constitutes the largest portion of household budgets for many families, meaning any rise in food prices due to shortages directly impacts people’s finances. However, Kaddunabbi said the situation could change if farmers insured their agricultural enterprises.
“Insurance serves as a risk management tool that can provide farmers financial security against losses in production,” he said.
Additionally, he said embracing agricultural insurance would also enable farmers to access credit from commercial banks, which have traditionally considered them too risky.
Ernest Barutsya Magezi, an insurance actuarial consultant and CEO of Kenbright Uganda, warned that because most farmers rely on borrowed funds to buy inputs, when losses occur, they often lack financial means to repay these facilities.
This, he said, often deters them from making further investments in agriculture. “However, for the insured farmers, in the event of loss, the insurer compensates the farmer to restore them to their pre-loss position,” he said.
Agriculture insurance scheme
Government intervention has played a central role in expanding access to agricultural insurance. In the 2016/2017 financial year, the government introduced the Uganda Agriculture Insurance Scheme (UAIS) to provide farmers with access to subsidised insurance.
The scheme is managed by Agro Consortium, an umbrella organisation of insurance companies offering agricultural insurance covering crop, livestock, aquaculture and apiculture risks. The government contributes UGX5 billion (about US$1.32 million) annually in premium subsidies to make insurance affordable.
To insure their crops or animals, farmers pay 5.5% of the value of the crops they want to cover, except in disaster-prone areas where different arrangements apply. Regulator’s records indicate that uptake has grown steadily.
By December 2017, only 45,704 farmers had taken up cover. However, the number had cumulatively grown to 687,608 farmers insured under the scheme by the end of March 2023. Over the same period, claims paid increased from UGX2.2 billion (about US$594,800) to UGX33.4 billion (about US$9 million) cumulatively by March 2023.
Growing demand
Calls to expand funding for Uganda’s agricultural insurance scheme have intensified as climate risks rise. Kaddunabbi said farmers who have embraced insurance have benefited significantly. However, he noted that demand for agricultural insurance subsidies is now outstripping supply.
“We are in discussion with the Ministry of Finance, Planning and Economic Development to increase the subsidy aiming at encouraging more farmers to adopt and embrace insurance and approach agriculture as a business venture,” he said.
The insurance industry, he added, plans to extend agricultural insurance services closer to farmers by licensing at least 12,000 dedicated agricultural insurance agents, working alongside the existing 3,681 agents selling other insurance products.
The chairperson of the IRA board, Isaac Nabeta, urged the government to triple its financial commitment to the UAIS from UGX5 billion (about US$1.32 million) to UGX15 billion (about US$3.95 million) to enhance farmers’ access to insurance.
Speaking at the fifth Insurance Innovation Awards in Kampala recently, Nabeta said additional funding would significantly impact the sector.
“The insurance industry needs an additional boost of UGX10 billion (approximately US$2.63 million) to make a substantial impact in the sector. Agriculture employs over 70% of Ugandans across the value chain, and it is imperative that we support and safeguard the livelihoods of farmers by enhancing productivity and stability,” Nabeta said.
In the 2023/2024 financial year, he said, out of 148,000 farmers who insured their crops, only 37,000 benefited due to depletion of available funds.
Overcoming constraints
Caleb Gumisiriza, director of policy at the Uganda National Farmers Federation, said weather index insurance has helped farmers meet contractual obligations even in poor seasons. However. he emphasises the need to build farmer confidence and improve understanding between insurers and farmers.
“There is a need for farmer education and awareness regarding insurance and how it works so that common misconceptions about insurance can be demystified,” he said.
For Alex Madolo, agriculture sector head at DFCU Bank, informality is one of the biggest constraints facing farmers’ access to finance and insurance.
“Many farmers still treat agriculture as a side hustle rather than a business. They do not keep records, they do not bank their income, and that undermines their creditworthiness. One simple but critical rule is that farmers must bank their money. Banks and insurers need evidence, proof of how much was spent on seed, inputs, and production, to assess risk,” Madolo explains.
Additionally, Madolo observes that some farmers have developed a victim mentality, yet agriculture must be treated like any other business.
“Our markets are still developing and the risks are high, but there are also information and risk-expertise gaps that need to be addressed,” he said.
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