The scheme will provide insurers with accurate information to calculate premiums.
Rwanda's government plans to roll out a scheme to tag livestock with electronic chips as one way of unlocking lending to the agricultural sector.
The scheme is expected to start next month with the chips used to identify the animals and collect data, which will be automatically archived with little or no human intervention.
This will provide insurers with accurate and timely information to calculate premiums and enable lenders to price loans.
According to government officials, the plan is to tag 277,000 cattle with electronic chips, which should reduce risks for both financial institutions and the farmers.
“Tagging the cattle and pooling industrial players will lower premiums rates. It is estimated that premiums will drop by about 30 per cent,” said Jean Bosco Iyacu, director of programmes at Access to Finance Rwanda.
Agricultural insurance products
Currently, only UAP Insurance Company and Soras have livestock and agricultural insurance products.
Robinah Batamuriza, in charge of agriculture insurance at UAP said many farmers do not know about the financial products available to them.
The scheme is set to be rolled out in drought-prone Nyagatare, Gatsibo and Kayonza in Eastern Province where there is a high fatality rate for cattle.
Other districts like Gicumbi, Musanze and Burera in Northern Province and Ruhango, and Nyanza in Southern Province will also benefit from the scheme, which covers accidental death due to lightening, injury, fire, wind storms, snake bites, flooding.
“The livestock insurance product is still new and we are still educating farmers about it,” said Ms Batamuliza, adding that insurers were charging premiums based on the market price of a cow.
The planned roll-out of electronic chips is part of the governments’ recent efforts to boost food production, tame inflation and reduce the ballooning import bill.
The government also plans to subsidise weather-based index insurance premiums to unlock lending to smallholder farmers.