Taxation for Weather Based Index Insurance in Kenya, Malawi, Rwanda, Tanzania, Uganda and Zambia

Overview

A major potential area for support for agriculture insurance for small-scale farmers has been premium subsidies from the government. However, premium subsidy decisions are difficult to make for governments in developing countries, particularly given budget constraints. A relatively low-cost and more effective alternative to direct premium subsidies can be tax-waivers. This policy brief analyses the tax treatment in Kenya, Malawi, Rwanda, Tanzania, Uganda and Zambia and presents viable options on how governments can support agriculture insurance for small-scale farmers. Findings indicates that in these countries, current taxes discourage investments from international institutions. The brief therefore recommends all countries in Sub Saharan Africa should consider instituting lower tax rates, tax-waivers or temporary tax relief during the early years of Weather Based Index Insurance (WII) products for smallholder farmers. This has the potential to lead to more affordable products with a higher chance of benefiting smallholder farmers. Simultaneously, policyholder compensation funds can safeguard farmers and encourage market competition, which may lead to better product innovation and product improvement. 

Year: 
2016