Weather Index Insurance of Apple Farming in Jumla

Weather related risks has increased the vulnerability of smallholder farmers and has negatively impacted their livelihoods. In this scenario, Weather Index Insurance (WII) can present significant economic efficiency by allowing farmers to put more resources on agriculture. It also helps open doors to avail ranges of other financial services.

Apple farmers are facing weather related risks such as drought and hailstorm which hampered their apple production. Farmer had bad experiences of production volume and quality of apple due to hailstorm. Limited rainfall in April and May also contributes to less production of apples as rainfall is required during its flowering season. Due to climate change, the adverse weather has severely impacted farmer’s productivity. In addition, due to hailstorm, the production volume and quality of apple is degraded.

Sakchyam’s Interventions

In an effort to contribute to WII sector, UKaid Sakchyam – Access to Finance Programme (Sakchyam) collaborated with Shikhar Insurance Company Ltd. to introduce WII of apple farmers of five apple farming districts in mid-western region for the first time in Nepal.

Sakchyam assisted Shikhar Insurance in developing appropriate WII product to minimize the effect of adverse weather in apple farming. Sakchyam and Shikhar conducted feasibility study to understand the need of insurance products for farmers. After analysing historical weather data and production data of apple, appropriate WII product was developed. Hailstorm was also added as an additional rider, as it is not measured via weather index, to address farmer’s risk of hailstorm.

Sakchyam supported Shikhar Insurance to introduce WII product in Jumla, Kalikot, Mugu, Dolpa and Mustang. Shikhar Insurance has started implementing WII in Jumla from 2016 while it has opened three more branches in Kalikot, Mugu and Dolpa to start selling WII in 2017.

WII is gradually gaining momentum. Shikhar was only able to sell the WII product to 41 apple farmers in the first season but expanded the product to 410 apple farmers in second season to reach a total of 451 farmers as of April 15, 2017. Total sum insured of the insured farmers is more than 24 million NPR.

Shikhar is also in the process of expanding WII product in paddy in Kailali and Kanchanpur, with the support of Sakchyam. They are expecting to introduce WII of paddy from this season.

Likely Outcome

Through its Sakchyam-funded project, Shikhar will serve more than 11,000 clients in different intervention districts.  They will also expand crop and livestock insurance to needy farmers. The product will cater to large sections of disadvantaged and marginalized farmers. This initiative is also expected to be replicated by other insurance companies in relevant crop and geography.