Blog / Vlog
Introducing DHAN Foundation People Mutuals and IBISA
DHAN Foundation is a Development Organisation working in India since 1997 with a mission of building resilient communities for poverty reduction through impacting livelihoods of poor and vulnerable sections of the society. DHAN Foundation promotes and nurtures new ideas on development themes such as microfinance, small scale irrigation, dry land agriculture, and working with Panchayats which can impact on poverty in a significant manner. Risk management is one of the key interventions for ensuring sustainable livelihoods. DHAN has developed a successful holistic, thus integrated approach of the multitude of problems through a model of community based mutual risk coverage to manage life, health, livestock and crop risks. DHAN People Mutuals is working with the communities since 2003. The present mutual risk sharing programme is covering risks of 350.000 families. DHAN Foundation and its mutual risk coverage entity, People Mutuals have agreed to pilot test IBISA.
IBISA is an Inclusive mutual risk sharing approach with low fees and fast claim assessment and payment.
From the choice of words describing both DHAN People Mutuals and IBISA you may think that both approaches towards risk sharing fits like a glove. And indeed it does. Let’s see how.
Why mutuality matters
The community organization model of DHAN Foundation aims at organizing the unorganized poor men and women into Self Help Groups/ Farmers’ Associations at villages or urban slums. These primary institutions function on the basic principle of mutuality and self-help towards achieving their super ordinate goal of poverty reduction. Hence identification of the low income households and small/marginal farmers is the primary and most important task upon which other interventions are planned.
The community organization model of DHAN Foundation aims at organizing the unorganized poor men and women into Self Help Groups/ Farmers’ Associations at villages or urban slums. These primary institutions function on the basic principle of mutuality and self-help towards achieving their super ordinate goal of poverty reduction. Hence identification of the low income households and small/marginal farmers is the primary and most important task upon which other interventions are planned.
With respect to agricultural insurance, numerous programmes have been launched and finished in India. The reasons for these failures are diverse, but quite often have to do with an unexpected multitude or magnitude of claims (mostly climate related) or inability to provide the manpower needed for claims handling, as well as lack of uptake and lack of renewal by clients. Research has shown that client value and demand are interlinked. Demand is determined by trust, income issues (so price matters) and the perceived quality of the crop insurance. Many farmers have experienced (too) long claims handling periods or lack of claims payment because of a report from a weather station deviating from the reality in the fields.
DHAN People Mutuals decided to fill the gap between the needs of the farmers and the available insurance coverage in the market, by means of a mutual risk coverage. This programme works with local rain gauges. Purchase and maintenance of these rain gauges is costly. Since DHAN aims at insurability for all farmers she will not load all costs on top of the risk premium. As a result it is tough to scale up this mutual crop coverage, without support from donors.
IBISA is specifically designed for smallholder farmers all over the world. But, IBISA is not insurance. The farmers use IBISA to share their risk.
The service of IBISA is a peer-to-peer, decentralized worldwide mutual risk sharing service for crop yields, that uses space assets (Earth Observation) and "wisdom of the crowd", made possible by the blockchain smart contracts, to lower costs of assessing events , extend geographic penetration and build accurate risks profiles. All this is achieved while keeping the financials profitable.
Thus the simple act of getting together, joining hands, sharing resources, risks and the needs, will unleash the potential of ‘Mutuality’. In this way smallholder farmers all over the world will have access to a risk sharing mechanism that protects them from falling back into poverty after a climate related disaster such as drought or excessive rain.
At this point in time the IBISA Minimum Viable Product is developed in close cooperation with the farmers and the organizations that work with these farmers.
DHAN is one of them and will provide feedback on the prototype, raise awareness amongst farmers and pilot test with at least 100 of them how IBISA contributes to their financial stability because their harvest is secure and whether IBISA stimulates savings and/or expansion of the farm activities. Integrating IBISA in the DHAN Foundation activities will mean for the members that risk sharing is part of other risk management and farm improvement practices.
We are convinced that this will stimulate the participation of the farmers in IBISA, because it will be seen as a value added service.
It will allow DHAN to scale the mutual crop coverage to all farmers who need it.