Closing Kilimo Salama spin out and capital raise

ACRE Board Member Dr. Wilson Songa at the document-signing ceremony

Lion’s Head have been advising the Syngenta Foundation on spinning out Kilimo Salama – it’s smallholder insurance surveyor in East Africa – as a standalone business, and raising third party capital to help it grow. Our work included developing the business model, valuing the business, identifying and managing discussions with potential investors, and advising on the overall execution of the transaction.

Martin Short, a managing director in our London office, will now sit on the board of the Agricultural and Climate Risk Enterprise or ACRE – the new corporate entity for Kilimo Salama.

For the press release by the Syngenta Foundation for Sustainable Agriculture, see below:

“Kilimo Salama” becomes ACRE [Link]: 

Nairobi/Basel, June 11th. The Syngenta Foundation today announced the launch of ACRE, a company created to advise insurers on protection for African smallholders. Agriculture and Climate Risk Enterprise Ltd. (ACRE) will continue the Foundation’s drive with ‘Kilimo Salama’ to reduce the burden of weather and other risks for small farmers. This is the first time in its over 30-year history that the Foundation has spun off a project to become a new company.

“We have shown since 2009 that affordable insurance for smallholders is not only possible, but also very popular, and that it helps farmers invest more in their crops”, says the Syngenta Foundation’s Executive Director, Dr. Marco Ferroni. “We are delighted that ACRE is now ready to act as an insurance surveyor in Kenya and plans soon to extend its services to further countries.” The new company is one of the few sources of smallholder insurance expertise in Sub-Saharan Africa.

ACRE starts operations with over 30 former Kilimo Salama employees, based mainly in Nairobi. Management reports to a Board that includes Marco Ferroni and Olga Speckhardt, who represent the Syngenta Foundation as majority shareholder. “ACRE is very fortunate in having secured investments by the Lundin Foundation, Grameen Crédit Agricole Foundation and LGT Venture Philanthropy”, announces Speckhardt. These investments are in addition to the grants won recently from the International Finance Corporation and other sources.

“Our investors are closely aligned with ACRE’s mission to help smallholders mitigate the many risks they face, particularly those related to weather”, adds Speckhardt. “Their involvement will greatly help ACRE and its insurance providers extend protection to potentially millions of currently unserved farmers.”

 

Further information on the investors is available at:

www.lundinfoundation.org  /  www.grameen-credit-agricole.org/en  / www.lgtvp.com

 

The Challenge

Around the world, millions of smallholders are facing the effects of climate change. Most of them farm fewer than five hectares, often in remote areas. Extreme or erratic rains, flood and drought threaten their livelihoods.

In Kenya, the agricultural sector employs three-quarters of the working population. In a bad season, smallholders can lose their entire harvest. They then lack the money to buy quality seeds and other inputs for the next growing season. Kilimo Salama is an agricultural insurance product that helps farmers cope with climate change and devastating weather shocks.

 

The Kilimo Salama Model

Kilimo Salama means “safe farming” in Swahili.

Insurance should be simple, affordable, and relevant to small farmers. Kilimo Salama insures farmers against drought and excess rain. Launched in Kenya in 2008, it is now the largest agricultural insurance program in Africa.

By the end of 2013, Kilimo Salama insured 187,000 farmers in three countries. Previously, few of them could afford such cover because of the high costs. Traditional crop insurance relies on expensive farm visits to verify claims. Kilimo Salama does not visit the farms. Most of the program is designed specifically for smallholders. It uses automated weather stations and mobile payments. These dramatically reduce administrative costs, finally enabling a premium price that millions of farmers can afford.