OKO Mobile-based crop insurance

Weather Index Insurance has been around for a decade, and is a promising solution to offer income security to smallholder farmers. But many obstacles remain, that make these products difficult to distribute and scale. OKO doesn't only create automated and affordable insurance products, but also makes them universally accessible.

Our solution is to leverage the ubiquity of mobile phones and the development of automated voice communication. OKO partners with mobile operators to make its insurance available from any device (no internet required). Furthermore, OKO develops voice-based interactions in local languages to overcome the illiteracy challenge.

Since January 2020, more than 1,800 farmers registered to OKO. Our solution is replicable to any mobile network. At a global scale, it has the potential to seecure the income of 500 million farms, and give them access to the financing tools they desperately need.

Smallholder farming represent 2 billion people globally (1 in 3 of all workers). In sub-Saharan Africa over 60% of the entire workforce is involved in agriculture. 80% of those farmers rely fully on rainfall. Their livelihood and ability to sustain their families are constantly under threat of adverse weather. This risk is increasing with global climate change. However, most smallholder farmers are deprived from basic financial tools, and crop insurance is offered to less than 3% of farmers in Africa (source: ISF Advisors, 2018).

In addition to being vulnerable to climate risks, farmers are un-able to invest in their agricultural business, as they are denied financing by loan providers. This slows down their growth, limits their ability to feed their community and makes agriculture unattractive to the new generation.

OKO is solving the problem of unavailability of crop insurance for smallholder farmers.

While technical solutions now exist, products are often too expensive, difficult to understand and not easily available. This gap needs to be solved so that all farmers can understand and take part in insurance programmes, through channels that are adapted to their way of life.

Our target customers are smallholder farmers, who work on less than 10 acres of land and do not have access to financing, irrigation of mechanic tools. Most of their income comes from agriculture, and this revenue is not stable month after month. They are equipped with simple phones but are not tech-savvy and are often illiterate. 20% have a WhatsApp account, which they check once every few days.

OKO has now 5,000 members of which 1,800 are paying customers. Through mobile communication, a field sales force and a call centre, OKO is directly in touch with this community and is collecting their feedback. This led us to prioritise our partnership to facilitate access to loans for example.

OKO address farmers' need by providing them income security as well as adjacent services such ass access to loans and pre-financing of seeds. OKO also contributes to their financial education thanks to our different communication channels and chatbots

Smallholder farmers represent a very large part of the informal population, and have no access to formal safety nets provided by the state. They are willing to contribute to saving schemes and informal insurance mechanisms, and all of them are member of informal saving schemes (Tontine).

But these saving mechanisms are not helpful in case of droughts and floods, which affect the whole community. Everyone in their community is exposed to adverse weather similarly.

By offering them access to weather insurance we increase their resilience and include them in the financial ecosystem.

OKO's insurance products are innovative compared to traditional insurance products as we use "index-insurance" products: claims are paid when specific threshold are reached (cumulated rainfall, wind intensity etc.). This saves us from sending claim adjusters on site and allows us to offer affordable insurance products with immediate pay-outs.

Within the index-insurance solutions, OKO further innovates through its distribution model. While other companies rely on third parties to distribute insurance (micro-loan providers, NGOs, cooperatives), OKO designed distribution tools and provides last-mile distribution. This includes a full integration in the Mobile Carrier's mobile money menu, a call centre, an app for our distribution agent, communication via voice messages (voice SMS and Whatsapp) and more. Customers are able to pay in small instalments, and can also request that their relatives pay (or contribute) to their insurance policy. Some demonstrations of our interface are available here: 

and here:

OKO keeps innovating to optimise its distribution model, and is now working on further automation via an Interactive Voice Response system and a Whatsapp Chatbot.

OKO also works on new insurance products to protect against pests and diseases.

OKO uses a distribution model that already works for life and health insurance, as proven by BIMA and MicroEnsure, two leading companies in this space.

OKO was launched commercially in Mali in January 2020. Since this launch event, close to 5,000 farmers registered to OKO and 1,816 paid their premiums to be insured for the upcoming season. This proves a strong interest in our solution, and the success of our distribution model. Indeed, despite only covering corn producers and being affected by pandemic-related restrictions, we managed to keep growing thanks to our digital distribution.

OKO also won the 2019 Fintech Showcase by the Alliance for Financial Inclusion (group of central banks and regulators), which shows that this solution si also supported by the regulators. https://www.afi-global.org/news/2019/09/winners-afis-first-ever-fintech-showcase-take-bow

OKO signed partnership with agro-industries such as ABInBev and Touton who see in OKO the solution to reach their sustainability goals.

Crop insurance has the potential to start a virtuous circle for the 500 million smallholder farms in the world.

Indeed the strongest need expressed by farmers is access to micro-loans and to seeds / fertilisers. Their exposure to climate risks makes it very difficult for loan providers to serve them.

OKO educates farmers to insurance, and allows them to get insured. This insurance, in turns, allows them to access micro-loans to buy better seeds and more fertiliser, leading to more production and higher income.

In the long term, this also makes agriculture more attractive to the younger generation, currently tempted to move to the city to find more stable jobs.

While in Mali, OKO's insurance is currently operating outside of social protection mechanisms, we have been in discussion with the ministry of agriculture. Indeed, the state has a plan to secure agriculture in Mali through a guarantee fund, but is still unsure what is the best distribution channel.

OKO could therefore become the distribution tool for a state-financed safety net for agriculture.

Many countries also subsidise crop insurance. This is the case for example in Uganda where OKO distributes drought insurance to barley farmers: the premium is subsidised by the state for up to 80% of the total cost.

Another example is India where farmers can request loans from the state if they contribute to the crop insurance scheme in place. Insurance is subsidised and compulsory if farmers want to benefit from these loans.

From a user perspective, the solution can remain just as user-friendly as it is today, whether it is integrated in a social protection program or not.

In the back-end, OKO has the ability to generate on-demand reports which can take into account a variety of parameters. Therefore OKO can provide a list of insured farmers to the "social protection programme" to justify a request for subsidy collection. Farmer would only have to pay the un-subsidised part and OKO would be in charge of collecting the rest. 

Similarly, if OKO is backed by a state-owned guarantee fund, the claim validation process can be shared with the state for them to provide the claim amount after checking that the conditions have been met.

OKO is connecting via APIs to different platforms:

- Weather data suppliers: this means that OKO could connect to another supplier if needed (e.g. the local meteorological agency)

- the mobile operator: for mobile payments, SMS and Voice SMS. OKO could therefore connect to other operators as long as they provide the same kind of services

OKO also exposes its APIs to different partners (Microfinance organisations, insurance companies) who need reports.

Our current weather data provider is TamSat, which provides its measurement for free and with no restrictions online.

As described before (and visible in the video demos) OKO is available from any device via the USSD technology. This means that farmers can access OKO without a smartphone, without internet and even without phone credit. They only have to dial a short-code (#144#3413#) and an interactive menu pops-up on screen.

While this requires customers to know how to reach french, they can also call us (or request a call-back with another short-code) if they want to talk to a call centre agent in their local language.

No contract needs to be read and signed and the few terms are simple to understand and explained over the phones. See our leaflet below:

For illiterate customers, we are using voice messages instead of text notifications, and if customers have access to Whatsapp we send them voicenotes and videos to improve their understanding of insurance.

Launched in January 2020.

Serving today: 1,816

By the end of the year: 3,776

In one year: 30,000

In 5 years: 998,000

For the rest of the year, our plan is to continue to improve our distribution system, and reduce the Customer Acquisition Cost. In parallel we will measure the retention rate. Our goal is to ensure profitability at an individual level.

Once this is achieved, our goal will move to scaling-up: investing in setting up the OKO solution in more markets and growing our capacity in each market. this will be our goal for the next 2 years.

In parallel we will work on developing new insurance products to insure other risks (pests and disease) and possibly diversify to other sectors (e.g. work interruption insurance for informal workers in cities, flood insurance for SMBs etc.)

We see a strong demand from the public and private sector for our solution. But as of today we are limited by two factors:

- Our business model requires upfront investment to set-up the solution locally and grow the user base before significant revenues can be generated. With limited funding at this stage, we are unable to scale up to more countries as quickly as we want

- Regulation: as we are positioned as an insurance agent, a licence is required in each market that we enter. This can take a few months and limit our ability to scale very rapidly.

Financial barrier: OKO is 

1. raising funds from private investors and
2. looking for partners who are capable of co-financing the initial operations of OKO.

Regulatory barrier: OKO can initially launch without a licence, by positioning itself as a "group policy holder" and recruiting member for this policy. This is during the initial stage when OKO is testing the model in a new market, and can give us time to apply for the agent of broker licence. In west Africa, the same regulation applies to all the sub-region (CIMA regulation) and OKO is already a licensed agent in one market, making it easier to obtain the licence in other markets.

9 people work full time for OKO: CEO, CTO, Lead Actuary, Developer, Country manager (Mali), Sales Director (Mali), Partnership manager (Mali) + 2 call centre agents

7 regional managers work on a seasonal basis

30 distributors are working as subcontractors (paid via commissions) 

SIMON SCHWALL – Founder and CEO, Master in International Management – HEC Paris & CEMS

Simon worked as a management consultant in London and Dubai for 3 years. Then Simon worked for 4 years at BIMA, a leading Start-Up in mobile-delivered insurance (Life and health). He launched and managed BIMA’s operations in Papua New Guinea and Fiji, managing up to 250 people and created the most popular insurance products in the Pacific. His impact on financial inclusion was rewarded by an award from a UN organisation

SHEHZAD LOKHANDWALLA – Chief Technical Officer, Bachelor’s degree in Computer Science – UC Davis
Shehzad started his career at the Mobile Strategy and Web-development team of UN OCHA. Since then, he kept developing technologies that impact development: in Laos with Friends Without a Border, in Tanzania with the Tanzania Education Corporation and more recently in Kenya with the One Acre Fund. He developed an expertise in creating impactful technologies for smallholder farmers.

RAPHAEL HAZIZA - Lead actuary, Masters in Actuarial Science from ULB (Belgium) and Sorbonne University (Paris)
5 years of experience in actuarial sciences working for a large re-insurance company (SCOR Group) before joining OKO.

MARIAM DOUMBIA – Bachelor in International and Development Economics from Richmond University (London). Mariam worked as an investment analyst for CrossBoundary, and then as a programme manager in Bamako’s leading incubator. Full Time. No other commitment.

Allianz Africa - 3 year partnership signed last year. Allianz reinsures the products that we design and introduce us to their local insurance companies for market compliance and distribution

Orange Mali - Standard partnership for Mobile Financial Service Provider + commitment by the CEO. Orange offers us access to their Mobile Money service, co-developed our menu and is supporting our marketing effort

ABInBEV: part of their 100+ Accelerator. Financing a pilot in Uganda to bring insurance to their barley producers

BAOBAB Mali (MicroFinance organisation): partnership agreement to give exclusive benefits to OKO members when they are asking for an agricultural loan.

Revenue:

OKO's business model is that of an insurance broker: OKO takes a commission out of every premium paid by farmers registering to its insurance product. This is beneficial to insurance companies or mobile operators who want to add this service as there is no upfront cost for them to launch OKO in their market. If the product is a success, it will increase their revenues, but if it doesn't they make no loss.

Operators want to add OKO to their suite of Mobile Financial Services because their need to generate transactions on their Mobile Money platform. And insurers need to launch micro-insurance product to comply with their regulator's objectives.

For OKO, this means that it is key to have enough customers and operate long enough to recoup on initial set-up and customer acquisition cost. But with a retention rate of at least 70% (measured on pilot customers), OKO will be able to generate significant profit in the years to come.

Impact:

- In the short term, OKO has a strong impact on financial inclusion. Directly as it offers farmers a financial safety net. Indirectly as farmers gain access to micro-loans. These two elements are measured regularly and provided to our impact investors

- In the longer term, OKO is mesuring the "progress out of povery" index for families that use OKO and compares it to that of families that don't use OKO. We will look at the benefits of securing their agricultural income over a long period of time.

OKO is on a 2 step pathway to profitability:

- In the current situation, OKO relies on private investment, subsidies and "consulting"-type contract to sustain its growth. OKO works with NGOs and with private companies and help them achieve their financial inclusion targets. OKO uses these contracts to cover the initial cost of deployment and the cost of acquisition of its early customers

- OKO will then generate revenue from its commission and re-invest these revenues in more distribution points and awareness campaigns to grow its cashflows. This will eventually fund OKO's growth in new markets.

We estimate that we need 20,000 paying customers in Mali to reach breakeven, which should be reached in early 2022. We will then stop relying on external funding and the model will be sustainable. We will only need external funding to grow internationally, which we will raise from private investors.

Pre-See round (capital):

- Techstars: USD 125,000 (Convertible note)

- Barclays: USD 20,000 (convertible note)

- ImpactAssets: USD 25,000 (SAFE)

- RaSa Future Fund: USD 56,000 (SAFE)

Bootstrapping:

- Luxinnovation: USD 166,500 (Grant)

- Israel Innovation Authority: USD 90,000 (Grant)

- Orange Social Venture Prize: USD 27,750 (Competition)

- Swiss Capacity Building Facility: USD 125,000 (Grant)

- Allianz: USD 9,000 (revenues)

- ABInBev: USD 97,000 (revenues)

- Operations in Mali: USD 5,500 (revenues)

OKO is now raising a Seed round of USD 1.5 million (equity) and we are hoping to close the round before end of September 2020. Some investors are already committed to join and some current investors have expressed their interest in providing follow-up investments.

Cost of distribution: USD 35,300

R&D: USD 102,725

Marketing & Sales: USD 97,520

General & admin: USD 156,500

We are applying to the Mission Billion Challenge for 3 reasons:

- Connecting with start-ups that have the same goals and the same challenges as us. We previously took part of a programme in Luxembourg (Catapult Africa) where we met companies with similar challenges and it helped us a lot to find good practices, partners in other countries and collaboration opportunities

- Funding: we are in a weird stage at the moment where we are post-pilot and generating revenue (therefore too advanced for acceration programmes) but not generating enough revenues to receive investment from VC funds. The prize money would help us in reaching the scale we need to become attractive to investors

- Visibility / Credibility: MIT Solve is a very credible organisation, well connected to development organisations and known by authorities in West Africa. The prize would be another "seal of approval" that will help us convince regulators and development organisations that we are a credible player in this space.

Product/service distribution:

We currently need help in optimising our distribution structure. While our innovation took us a step forward in terms of scalability and efficiency, we cannot ignore the need for in-person referrals and interactions. We therefore need to work on our incentive programme and build a referral scheme. We could use some help in this projects

Funding and Revenue Model:

Receiving a prize from MIT Solve would help us gain visibility and credibility among US-based impact investors. We could also find opportunities to work with your partner development organisations and generate "bootstrapping" revenues

Monitoring and Evaluation:

Now that we have 1,800 paying customers, we have the opportunity to conduct studies and monitor our impact more precisely. We could benefit from academic support in this mission. 

Word Bank: The world Bank has created the Global Index Insurance Facility which works on the same topics as we do, and provide funding for pilots. We have tried to approach them in the past with no success. Having some connections via the MIT Solve organisation could help us.

World Food Programme: the WFP has created the R4 solution to bring crop insurance to smallholder farmers in some markets. But their solution rely on donors' funding. We would like to work with them on transitioning to a sustainable system, using our solution

AXA: This large insurance company has presence in West Africa and is committed to developing weather index insurance (via their AXA climate branch). We want to help them with our distribution solution.

MTN: As one of the largest mobile carrier in the continent, we would like to have them on our side, as it would help us enter more markets, and reduce our dependancy on Orange.