Research into how Uganda’s three million smallholder farmers perceive risk led to the development of a new drought insurance scheme, subsidised by the Ugandan government. The scheme now protects more than 225,000 smallholder farmers against the risks to their livelihoods posed by drought, pests and poor quality seed, and boosts productivity by providing smallholders with the confidence to invest in their farms.


  • The research findings led the Government of Uganda to change its agricultural sector strategy and, in 2016, establish the Uganda Agriculture Insurance Scheme (UAIS) providing subsidised insurance together (‘bundled’) with other products (such as good quality seed) and services (eg, loans) to promote agricultural investment.
  • Based on the research, The Agro Consortium, a new private sector organisation of 11 insurance companies in Uganda, introduced a range of new products designed to better meet farmers’ needs. Demand for this ‘bundled’ insurance has since grown rapidly: from 25,000 policies sold in 2017 to more than 225,000 policies in 2020.
  • The confidence provided by the new insurance scheme has led smallholders to increase investment in seeds, tools and labour: newly insured Ugandan smallholders with one acre of land increase investment by 60-70% and by 100% for those with five acres or more.
  • The research team worked with partner Omulimisa to develop insurance in a beneficial and appealing way to farmers via the use of innovative mobile phone technology in the hands of local people which enables easy sign-up and quick, no-fuss insurance pay-outs.

From my perspective, [the new] agriculture insurance is beneficial to us farmers because it enables us to borrow money from financial institutions and invest in farming without worrying. When you borrow money to invest in farming and there is a drought, you lose twice; you lose the crops, and you have to sell one of your assets to pay the money you borrowed. But if you have agriculture insurance, it will pay the money you borrowed.” (George Shangi, Farmer, Bulambuli district, Bwikhonge sub county, Bunamwamba village)

About the research

Research by Professor Arjan Verschoor and Professor Ben D’Exelle explored how smallholder farmers in eastern Uganda perceived financial risks, and whether this influenced decisions to invest in productivity- boosting technologies such as fertiliser, seeds and irrigation.

Building on over two decades of systematic and sustained grassroots research among 3,000 local farmers, as well as farmer organisations, agricultural service providers and district agricultural officials, the research team found that existing insurance which paid out only after a drought had occurred, and often failed to pay out at all, was unpopular.

“In eastern Uganda there is a chance of drought once in every six years as well as risks from erratic rainfall, locust attacks and counterfeit seed,” Professor Verschoor points out.

“Smallholder farmers who take out a loan to improve their farm are playing Russian Roulette with a one in six chance that they can’t pay back the loan and will lose their land and their livelihood. Until recently farmers did not trust insurance to cover those risks, trapping them in poverty due to under-investment leading to low agricultural productivity and, ultimately, food insecurity.”

To solve this impasse, the research team worked locally and nationally with Ministry of Agriculture officials, insurance companies, banks, and international development agencies to devise a workable risk management solution. The researchers proposed using satellite images in providing insurance against drought and erratic rainfall offered together with certified seed and pesticides to take care of the risks posed by fake or damaged seed as well as pests. By offering this insurance combined with a loan, all the major risk factors were covered enabling smallholder farmers to invest on a larger scale.

“Supported by government subsidy, this agricultural insurance scheme is now highly attractive to farmers,” explains Professor Ben D’Exelle. A typical smallholder farmer with one acre of land earns on average £100 a year from selling about 10 bags of maize. Now, potential loss can be covered by a premium of just £5, with rapid payment based on satellite identification of inadequate growing conditions. One further attraction of the scheme is that farmers no longer need to rely on their neighbours for support if ill fortune occurs: fear of exposing other farmers to risk had previously been a factor holding back investment.

More than 1.5 billion people in the developing world live in poor smallholder farming households fearful of uninsured risk. “Our research shows how insurance can be designed to help farmers better cope with risk, so that they can confidently invest in their farms, increase productivity and help bring about food security,” says Professor Verschoor.

Lessons from this research are transferable on a global scale. “What we discovered is that insurance needs are highly contextualised,” Professor Verschoor explains. “Risk factors vary from place to place. But, with a deep understanding of local risks, we have a model that could be adapted to offer insurance packages that lead to increased smallholder investment and a safe route out of poverty in other developing countries around the world.”