Basic economics teaches that a growing population is expected to be commensurate with rising food/agricultural production. This is because as the population grows, so is the demand for food. Ghana after independence has been experiencing astronomical growth in population. A country with an estimated population of 6 million at independence in 1957, was 18 million in 1996. By 2021, the population of Ghana has hit 30.8 million. Two years later, the country was estimated to be 34.1 million in 2023.
The Institute of Statistical Social and Economic Research (ISSER) estimates Ghana’s population growth rate to be 2.1% per annum. With the current population of over 34 million, it is estimated that it will double in the next 33 years to reach about 62 million should the annual rate remain the same.
This astronomical population growth when juxtaposed with the fixed land size of Ghana is a cause for concern especially at a time when agricultural lands are fast depleting due to a number of factors. Apart from bad agricultural practices, illegal mining is threatening the country’s arable lands at a time when climate change is further exacerbating food production worldwide through drought, floods, and others.
In the midst of this heightening climate change wreaking havoc on global food production, especially in developing countries, insurance has been found to be one important means of safeguarding agricultural produce.
State of Africa’s Climate Insurance
The United Nations Economic Commission for Africa (UNECA) indicates that out of the 20 most vulnerable climate change countries in the world, 17 are in Africa. This signifies how the continent of Africa – including Ghana, stands most threatened as far as food production is concerned given the prevalence of Agriculture on the continent. For instance in August this year, about 107,000 hectares of farmlands were destroyed by floods in Northern Nigeria.
Climate Insurance has been adopted as a crucial response to the risk of climate change. According to the Honorary Vice President of IMANI Center for Policy and Education, Bright Simons, as of 2020 “half of all farms in the poorest countries of the world had some form of insurance.” However, the sad reality is just below 3% of the highly risked countries in Africa had some form of climate-based risk insurance. The figure is even starkly low among farmers and rural dwellers in Africa. While Africa is recording just 3%, Asia is recording more than 50% considering the fact that agro-insurance penetration in Asia was less than 0.05% some 20 years ago.
The case of Ghana in the African context when it comes to agro-insurance penetration is not different. Even general insurance penetration is an eyesore as the National Insurance Commission figures (NIC) put the rate at 1.13% as of 2021. A study on the insurance access and acceptability among smallholder farmers in Ghana, specifically in the Northern, Volta, and Western Regions revealed a very low access and acceptability rate of 14%. This low penetration rate magnifies how food production in Ghana and the livelihoods of Ghanaian farmers are at risk.
Importance of Agro-Insurance as Climate Change Bites Hard
Agriculture, since time immemorial, has been considered the lifeblood and backbone of Ghana’s economy. The sector is estimated to employ about 44% of the country’s workforce while contributing over 20% to the country’s GDP (GSS, 2024). With intensified climate change, floods and droughts, once sporadic, are becoming more frequent and intense, endangering crop yields, disrupting food supplies, and placing immense pressure on local markets. This is happening at a time when the country is experiencing an astronomical spike in population. The effect on rural Ghanaian communities is also very profound: with each failed harvest, food prices climb, household incomes shrink with food insecurity becoming more apparent.
Agro-Insurance has emerged globally as a key buffer for climate-related risk to agriculture. There are numerous important benefits of agro-insurance if prioritized;
1. Agro-insurance secures farmers’ income and reduces poverty by compensating farmers for their loss in the event of precarious weather events. It serves as a financial safety net for farmers.
2. Agro-insurance also enhances food security. Farmers financially protected are more likely to continue planting after a disaster maintaining food supply and reducing the tendency for food shortages.
3. It also encourages climate-resilient farming practices and insurers ensure that they offer training and incentives for farmers to adopt climate-resilient practices.
4. It also reduces the government’s burden and emergency spending hence providing the fiscal space to allocate resources to other critical areas even in the event of disaster.
5. Agro-insurance also aligns with Ghana’s goals of adapting to climate change by embracing resilient farming practices against climate shocks.
6. It also aligns with the government’s agenda of financial inclusion. Agro-insurance helps to bring smallholder farmers into the financial system.
Call for Action
There are a number of global support schemes Ghana can benefit from. These include the African Risk Capacity, Global Environment Facility Adaptation Fund, Green Climate Fund, and InsuResilience Global Partnership among others. Aside from these global support schemes, Ghana must take steps to remove the bottlenecks militating against the penetration of agro-insurance in the country.
Improving agro-insurance penetration is a crucial step toward securing the livelihoods of farmers, sustaining food production, and promoting economic stability. By protecting farmers from climate-related risks, agro-insurance not only safeguards Ghana’s food security but also fosters sustainable development reduces poverty, and strengthens the resilience of the agricultural sector.
