"Change the future of migration. Invest in food security and rural development."
The slogan of this year's World Food Day resonates deeply with me. After all, agriculture is one of the largest employers in many markets of the world, and as I am responsible for our business in high growth markets, it's also my job to help ensure that farmers stay in business and don't have to abandon their farms and move to the cities when disaster strikes.
The record monsoon in India this year has devastated farms, smallholders in Africa suffered badly under the severe drought last year, Brazil was hit by a historic water shortage in 2015, and large swathes of Pakistan's farmland have been flooded several times in recent years. The recent hurricanes in the Caribbean devastated the islands and erased the very livelihoods of countless farmers in the region. Looking further afield or back in time, we find that this is by no means a local or isolated phenomenon but one that repeats itself again and again all over the world.
Farmers in these countries tend to be smallholders. They may have some equipment and a little food stored for their own use but rely heavily on the next harvest to keep going. If disaster strikes, they often have to give up their farms altogether. Banks won't lend them any money after a catastrophe because they have no collateral left. Nor will they grant any loans before an event because they are concerned that the farmers will not be able to pay back the loan if disaster strikes because they have no insurance.
In contrast, farmers in many mature markets normally don't face this problem. If they're hit by hail, drought, flood, storm or frost, they can rely on insurance to cover the loss. Banks readily lend money to them because insurance gives them the peace of mind they need to grant loans and enable farmers to grow their business.
And yet, the world will need more and more farmers to feed a growing world population that is increasingly moving into urban areas. Much of the population growth will take place in emerging economies in Asia, Africa and Latin America. And as the Food and Agriculture Organization of the United Nations (FAO) stresses in its announcement on World Food Day, significant investments are necessary to enable agriculture to grow in line with the increasing demand.
So why not replicate the concept of insurance that keeps farmers in business in mature markets and enable them to unlock the investments needed to feed our growing population? Insurance has in fact become a valid option even in emerging markets today, with the advent of innovative, low-cost index insurance.
Take index insurance against drought, for example: this new form of insurance uses satellite images to measure average and absolute rainfall amounts around the world. If the rainfall is below a predefined index or threshold, insurance remunerates the affected farmers, enabling them to buy seeds for the next season. In Africa, we are selling index insurance products with our partners to smallholder farmers via mobile phones. The products can easily be replicated to many other parts of the world, and can even be bought by governments, as was recently the case in China.
Insurance coverage allows farmers to stay in business and pay back the loans they need to expand and feed our growing cities. What's more, they will not need to migrate, as one poor harvest will not force them to give up their farms. Instead, they will be able to grow their businesses over time, generating employment and thus helping to make the societies they live in more resilient.
We have the necessary tools ready, and it's now up to banks, governments, farming cooperatives and farmers, the insurance industry and other stakeholders to join forces and make it happen. Let's start today the work to ensure that the growing global population will have enough to eat tomorrow.
Category: Food security: Farming