How OKO is Reshaping Agribusiness in Africa with Parametric Insurance

In this episode, we sat with Simon Schwall, a micro-insurance specialist and Founder of OKO; an insurtech company leveraging mobile technology & Satelite data to offer simple and affordable Crop Insurance to small-scale farmers in Africa.

OKO is based currently operating in Mali and Uganda and is looking to expand across Africa starting with Cote D'Ivoire.

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Transcript

Simon Schwall  0:00 
Hi, I'm Simon Schwall, the CEO and Founder of OKO insurance. And I'm using InsurTech  Business Series Podcast to keep informed about the insurance news in, in the continent. And I invite you to do the same.

Folumy  0:22 
Welcome to the InsurTech Business Series Podcast, I am Folumy

Damola  0:26 
And I am Damola. Together, we host the most exciting podcast on insurance and insurtech related topics in Africa. Stay tuned.

Hi, and welcome to another interesting episode of InsurTech Business Series. And today, we have a very interesting person in the house. And we're super excited about this conversation because we're looking at the Agric business space and he's playing in that area providing insurance very specific insurance for small scale farmers. And we are super excited about what has happened with their company recently. And then looking at it broadly about how insurance can play a better role even in the Agric space on the African continent. So without further ado, welcome, Simon.

Simon Schwall  1:23 
Hi, thank you for having me Damola & Folumy.

Damola  1:25 
Awesome, awesome. Pleasure to have you. So we always like to start off with asking how our guests is, and just hearing how they have been. So Simon, how have you been in the recent times? I know there was a raise recently but how are you?

Simon Schwall  1:41 
I'm very good. It's exciting to have past this stage of raising funds. It's not all celebrations and holidays. It's a tonne of work. So I'm still tired. But it's exciting.

Damola  1:54 
Awesome. Awesome. So I mean, there's no conversation that you have right now that don't mention about the COVID-19. And then the new reality that has brought to the world generally, and even looking at the African space where you play. So for you personally, how have you been able to navigate this new reality? And I mean, I'm sure that would have affected your business. But then you personally How have you been able to manage this new realities?

Simon Schwall  2:22 
Yeah. So personally, I've been I feel like, I've been pretty lucky because I am based most of my time in Israel. And we've been receiving a lot of vaccines free way early on. So I've been vaccinated already for two months, things are starting again. So this has been difficult in the past year. But now we started seeing starting to see the end of the troubles. So I'm optimistic. For the company, it's been a bit more complicated because I've been unable to travel as much as I wanted to see the operations in Mali and Uganda to meet with new partners. So that's been, that's been more challenging. But that being said, I think we've been less affected than other companies because we are digital. And because we allow our customers can can register remotely can pay with mobile money. So we haven't had to close our offices or operations.

Folumy  3:24 
Yes, I know that you're the owner of OKO but a lot of people would like to meet Simon. Who is Simon even outside, this insurtech company that you currently run?

Simon Schwall  3:35 
Okay, so yeah, I'm French and from Luxembourg. So I got two citizenships I've been I've got a background in, in business management. So I had an international career and life so far. I was born in Luxembourg, live in France, studied in Singapore, started my career in London, then moved to Dubai. And things started to get even more exciting when I joined another startup called Bima in 2014, and moved to Papua New Guinea. So that's when serious things started happening. When I started to work in the insurtech space as a startup entrepreneur, and discovering the world of mobile finance and finance in emerging markets. So yeah, and then moved to Israel worked in Egypt worked in, in Senegal. So yeah, I think one thing that can characterise me is that I've been travelling a lot and moving a lot. Although in this time, the lucky father of a six month old baby and I enjoy cooking and surfing and playing the piano. So in a few words, that's me.

Damola  4:55 
Oh wow. That's really interesting. I mean, I'm sure that the past few months few years has been quite interesting for you being that you've always done a lot of travelling before now. So I see that you mentioned that you had some experience working with Bima. And so, we are going to go into OKO and what are you're doing there, but then how did your experience with Bima, for example, maybe shape what you're doing with with OKO at the moment?

Simon Schwall  5:32 
So I think in two main ways, first, personally, it was the first time that I had a real entrepreneurship experience, even though I was not a founder or at the C-level position, I was still the local founder, and the only responsible like the person responsible for all the operations in the market in Papau New Guinea. So this gave me a big challenge. But overcoming this challenge and being able to successfully launch the company make it grow. It gave me the self confidence and the trust that I could do this again by myself next time. And then, as from a business point of view, the idea of OKO is to build on what we've been developing at Bima in terms of distributing insurance very effectively using mobile network operators and mobile technologies to the unbanked so and we're leveraging on this at OKO, adding more complexity, because we're talking about crop insurance, and we need to monitor the fields we're talking to, to a target market that is less financially educated and has more challenges. So it's, it has built the foundation of, of OKO. So it's Yeah, it shaped or go quite, quite a big influence.

Folumy  7:01 
In fact, this is so impressive, because one of the questions I was going to ask you was going to be as a result, or, you know, seeing that OKO actually has some some of the similar models of Bima. I literally used to track Bima's model and know is one of those impressive distribution models. But before before we dive into all of this, one thing I want to ask is, what is OKO? What does it mean? Where did the inspiration for for that name come from? A lot of us have been questioning that because OKO for us in Nigeria, especially for people that are from the Yoruba decent, understand that as farm. So this has been one of the questions has been burning in my mind that What does come mean to you? And where did that name come from? And of course, how exactly does this you know, differ from what Bima has done over the years?

Simon Schwall  8:04 
Okay, so first of all, OKO it comes from, from Nigeria, originally, it's the name of an orisha. So a kind of deity proective of agriculture and fertility and good harvests. It also known in Latin America, because the orishas have travelled with the people. And even though I talk to Nigerian people, and most of them don't know about it, so it's, it's kind of, it's only for specific groups and cultures. But yeah, I found that this was a good name for what we try to do. It's originally from Africa, but it has been travelling. It's protective of agriculture. And it's also a short name that is easy to pronounce in any language. And it doesn't take too much character space on the phone. So that's all the important criterias. Now, for your other question, and how it differs from from Bima, so few few different things. First, we only look at crop insurance, while Bima is doing Life and Health insurance. And we use mobile payments, mobile money payment, where Bima at least when I was still with them, where we're using mostly airtime deduction, which changes quite a lot of things in your relationship with the mobile operator and the revenue model. So yeah, these are I think, the main the main differences, but the distribution model is similar otherwise, yes.

Damola  9:37 
That's quite interesting. And so how exactly does OKO go about this crop insurance? Help us understand, I mean, how you are serving the market.

Simon Schwall  9:47 
So I'll explain from the point of view of a farmer I think that's going to be the most interesting. So as a farmer you, you can hear about OKO on the radio or you receive an SMS but you can also find it In your mobile money menu, and you can find more information there and asked to register. So when you are asked to register, basically you request a callback and one of our call centre agents will call you back, ask you a few things, they will ask you, your location, your crop and the acreage the land that you're using. Based on these three pieces of information, we will send you a quotation for insurance that will cover you against weather risks. So usually it's mostly droughts and floods. You can choose them to pay this, this quote pay for this insurance via mobile money either in one instalment or in multiple instalments. And as soon as you started paying, you are activating your policy. And then we start our work, we start looking at the weather in the location of your field. And if we see that you have been suffering from a lack of rain, or excessive rain, then we automatically send you a compensation or financial indemnity, for to compensate for the loss harvest. So that's how it works. We also have field agents that meet farmers on site. So it's not necessarily done over the phone, it can be done face to face.

Damola  11:23 
That's kind of like a parametric insurance model, right?

Simon Schwall  11:30 
That's correct is called index or parametric insurance. And that means that farmers don't need to wait for someone to inspect the fields to validate the claim, everything is based on data and more specifically on an index. So then we look at cumulated rainfall or intensity of rainfall to measure if if there was a drought or a flood, so everything is automated based on satellite data.

Folumy  11:54 
Okay so what would you see as being your challenges with respect to you know, applying parametric insurance? Because I know that some of the fallout from this especially as relates to I mean, some people have attested to the fact that sometimes it is it can be inaccurate sometimes. Exactly. I have you been able to, you know, deal with some of the challenges that relates to using this particular model?

Simon Schwall  12:23 
So, yes, good question. Indeed. So, crop insurance solves a lot of challenges, the challenge of visiting the farms of also potential fraud, like bribes or simulating a calamity. But it comes with its own challenges. So indeed, the data that we  get is not always correct, even though we try to choose the best data possible. And it's not precise to the level of the farm, but only to the level of the village, circuits, four squaree kilometer granularity. So it means that a farm can be affected differently to another in the same location based on the altitude, for example, or other elements. So the way which we overcome this is by education. We educate farmers about how it works so that we don't build wrong expectations, farmers know that we look at the village level and the all the farmers in the same village will be compensated the same way. And that helps to overcome this, this challenge. We also try to use more and more data to improve the precision of our analysis. So that's, that's the product is getting better and better over time.

Damola  13:43 
Okay that's, that's quite, that's quite interesting and its going to be interesting to hear. I mean, I know that you currently are in Mali and Uganda, right? What is the regulatory environment I mean, in that, in that space? Innovation is usually always ahead of regulation, right and your business is, is using a lot of technology and thinking about the whole micro insurance differently. So what's the role that the regulator has played in some of those markets that you are currently playing?

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Simon Schwall  14:59 
Okay, so regulation is, is really important in insurance. So try to work as closely as possible with the regulator. We know of some projects that have failed because they didn't have the right authorizations. So yeah, a really strong advice I will give to people want to go into their space is to work closely with the regulators. And two things. First, the regulators are really pleased to see this kind of initiative, because they've been pushing insurers to offer solutions for the most vulnerable for a long time. And they are happy to see solutions like this being developed. But then they also have a role of monitoring what's what's happening, and making sure that everyone is is licenced correctly. So, we are registered as a local insurance agent in Mali, we work hand in hand with local insurance company that has the right licence to distribute crop insurance. We involved the regulator in the discussions, when we started, when we designed the product to ensure that there would be they would have no objections to what we do. But yeah, overall, the regulation is quite supportive, because they, they have goals in terms of financial inclusion. There's only one country in Africa that I know of that is not accepting index insurance at the moment, and that's South Africa. Other countries are at that my, as far as I know, are authorising this kind of product, and encouraging them even because of the impact it can have on the the vulnerable rural population.

Folumy  16:46 
You actually just because I was gonna ask about how you intend to expand, you know, your business across Africa. Looking at the fact that, you know, this recently signed Africa Continental Free Trade Agreement. And would you just play within the space of money and Uganda, or you're looking to expand, like leverage on this particular opportunity and expand, the business model across the other parts of Africa? I'm Nigeria, so probably asking about Nigeria, as well.

Simon Schwall  17:24 
So we have the ambition to be a pan African company, and possibly the biggest player in Africa in terms of of crop insurance. So we have very high ambitions. So Mali, and Uganda is a starting point, but we want to expand. The idea of launching in Mali first was that we see most of the innovation coming from three places in Africa; Kenya, Nigeria, and Egypt to some extent, and maybe South Africa but that's different kinds of innovations. And Francophone Africa is usually lagging behind, it's 10 years behind or five years behind in terms of innovations. So knowing that I'm native French speaker, and also had good contacts at Orange, I thought I should use this opportunity to bring innovation quicker to West Africa and to Francophone Africa, and to benefits from what has been a problem so far the lack of innovation, like being the first there and avoiding frontal competition. So the idea is to develop in West Africa, we are looking especially at at Ivory Coast as the next market, potentially also Ghana, Uganda was an opportunity because we have been selected by AB InBev. And brewery more specifically to bring insurance to their barley farmers. So that's why we went to Uganda. But now it's good because we have multiple partners in terms of insurance and mobile operators. So that helps us also to cover more countries in Africa in the future.

Damola  19:12 
Yeah, that's, that's very good. Because I mean, I also have been looking at innovation and all of these activities recently and even looking at the the industry as a whole, the Francophone parts have been lagging behind, like you said, and I've had some conversations with people from that part of the African continent and, you know, they're all of these sentiments as regards not seeing those innovative products that are evidence in maybe Nigeria or Kenya or South Africa, Egypt, you know, so so that's, that's quite interesting that you are looking to go into the Ivory Coast and I know that recently, you had some investment and Congratulations on that. That for me, I mean, looking at it from the outside in sort of like gives validation to some of things that you've been doing for the past few years. Right. And also for the insurech community, on the African continent. It also shows that there is promise in this space. And we have seen, not just yourself, you've seen other insurtech companies as well get funding; Lami in Kenya, Curacel in Nigeria as well. So what I want to ask now is, I mean, you are still on that journey I but then you have come some way. So what would be your advice for for insurtechs or people who will want to enter into the space, I know that you talked about what they should do in terms of regulation, but looking at some of the experiences that you've had, and all of these engagements will be advise to insurtechs coming into the space, looking to play a role.

Simon Schwall  21:02 
So it's not it's not just random that investments are made in the space and that you see more and more startups, it's, I think it's because we all agree that there's a big opportunity there. In a more mature market, I would say like, in Western Europe, in the US, everyone has insurance, and everyone has access to credit, everyone has credit cards, etc. But in Africa, a large part of the population has not had access to the services yet. So banks don't really have the like the market share that they have in banking, insurance and more that they had in have now in more established markets. So there is still a place to be taken. And we see mobile operators going into this space, but also more and more startups. Because there are now tools to distribute these insurance products, thanks to smartphone penetration thanks to also just mobile phone technology. And there's a real need by people to access financial services to grow their business to secure their financial prospects. So I think that's why it's all coming together now. There is a need by the population, there is technology that allows new services to be developed and there is a lack of the lack of services available. So there is there is this opportunity and startups are well positioned to go after it because they are more flexible and the they don't have all the fixed costs that a big company can have. That being said, the it's also very important to work hand in hand with this large financial companies when you're in InsurTech or in FinTech, because as startup you don't have the funding and the financial guarantees to reassure the clients, the customers and the regulators.

Folumy  23:12 
This has obviously been one of the most interesting conversations we've had after our Agribusiness webinar. And I know again, that with this, a lot of people are beginning to see the opportunities that lies within the agric business space. But before we let you go would like to know what you would what advice you would give to people in this space that are looking to delve into agribusiness. I mean, there must have been a reason why you didn't want to do Life you didn't want to do Health you chose Agric of all of the other types of insurance. And so what were your thoughts, your challenges? And for people that are coming up? How exactly can be upscale their products, or their businesses to something as you know viable as OKO?

Simon Schwall  24:08 
So the way I see it, there are waves of services. So first came, mobile money, people use it to transfer money locally in the country, and then internationally. Then came payments to third parties. And then came insurance and the first product first insurance products were Life & health. And at the time when I launched OKO, I thought okay, what what is going to be the next thing, the next big thing. And as an entrepreneur, I think that's what you always need to think of you need to live kind of in your predictions of the future. So you need to look at the market metrix, but also your own convictions and see what you think is going to be the next big thing. So in my opinion, I could see that the majority of the population in Sub Saharan Africa lives on agriculture, that other financial services have been successful already, like payments and some extent credit, microcredit. And already some kind of insurance. So I thought, okay, that's, that's what's going to come next is, is crop insurance, such a big need for it, such a large population that says requires it and are now equipped with phones. So that's, that's where I need to bet.

Damola  25:25 
Thank you very, very much for for that. It was it's quite interesting as well, that you are quite focused on weather risk. And I mean, I'm just curious to hear your thoughts. I mean, I don't know if maybe this is part of future plans but are there plans to maybe provide other solutions, like to cover political risk or, you know, terrorism and things like that, which also affect farmers especially these small scale farmers who are on the ground and who are, you know, feeling the brunt.

Simon Schwall  26:03 
So we started with, with weather insurance, because simply, it's the easiest thing to monitor remotely. It's difficult to observe a localised disease, for example. But weather is already monitored, has been monitored for many years. So we have also the data. So that's easiest easier. But we know that there is need, we hear our customers saying that they would like to be covered against pests and disease. And everyone is not the only one in this space. And everyone is trying to find solutions for this. So we also investing in research and development to to develop such a product. It's not ready yet. We need to work more on this. But yeah, that's the idea is to offer a full protection to farmers. And we might also diversify into price insurance, if the price of a specific commodity falls, we could try to protect farmers against this. And we've also been thinking in the context of COVID, about a work interruption insurance. So if marketplaces for example, cannot be cannot operate, if stores have to be closed, if transportation cannot cannot continue, then farmers are left with their products and no way to sell them. So that's also a risk that we could try to cover. But we still have to do it, you're thinking about how this will work.

Damola  27:39 
That's, that's, that's quite interesting. And definitely, the possibilities are endless, and just continue to iterate. And that's the beauty about being an InsurTech, you know, being able to iterate and think about some of these solutions and find ways to to provide them, you know, profitably, definitely. So yeah, that's that's, that's really, that's, that's really interesting. Looking at the the the Agric space. I mean, you talked about why you you entered into this space, initially focusing on crop insurance, right? But in the light of the African Free Trade Agreement, I'm going back to that now. What kind of opportunity is there for the insurance industry as a whole, not just yourself, because definitely the market is there, but we need a lot of hands on ground to actually provide these solutions to a lot more people who actually need them. So I mean, do you have numbers or things that you have seen or your, you know, that tells about the opportunity that is there for the industry to just tap into.

Simon Schwall  28:57 
So to be honest, I haven't seen really the opportunity of the Free Trade Agreement just yet. But what I've been pleased with is to see that there is already a lot of cooperation between the countries to to help spread innovation, for example, the whole West Africa, or there are many countries in West Africa united not only by currency, but also by regulation. For example, they have the same central banks, they have the same BCEAO, they are the same insurance regulator CIMA. So it makes things easier to replicate in more and more markets. It's not perfect yet because even though we have a licence in one market, it doesn't allow us to go into other markets that is we need to still incorporate locally a new entity and obtain the licence. So if that's becomes easier with the Free Trade Agreement, that would be definitely a benefit because there's a lot of time and energy lost. In the process of being registered in every market, having a local entity then contributed to the account. So that's, that's a struggle. And that's also a problem for the smaller countries, because when you when you have the same hurdles to go through to pass, whatever the market size, then you will prioritise the large market, and some smaller markets will will always be left behind. So, definitely the more and more cooperation between between markets is a good news. But I can't tell you specifically for the African free trade agreements, what benefit we see immediately. Again, yeah, also, I forgot to mention this, the visa requirements is, is easier in some markets for somebody in East Africa between the different East African cooperation countries, member countries, people can work in all the countries without need of a visa, same thing in West Africa with the markets alliance. And also in terms of property rights, like the IP rights are also organised regionally. So that helps. So I didn't know about all these different alliances or cooperations. But this is definitely helping. And the African Continental Free Trade Agreement can only improve this even further. So that's Anyway, good news.

Folumy  31:27 
Thank you very much, Simon. I mean, again, like I mentioned earlier, this has been a very interactive session. And I like the fact that we've had this conversation, especially at a time like this. And also, like Damola said, congratulations on your investment, I'm sure that that would obviously increase the buffer to penetrate other market space, like you've also mentioned in the course of this interview. So we're grateful that you agreed to come on this podcast. But before you go, for people that are looking to, you know, contact you, access you in any way, would there be a way we can reach you, especially before our listeners,

Simon Schwall  32:09 
Sure. So we have we have good presence on social networks, you can follow us on Facebook, if you want to, if you're if you want to see how we serve our our farmers, see some testimonials and stuff like this. And we have a YouTube channel where you can see all sorts of content, testimonials, but also explanations and interviews. And if you want to speak to us personally, then I would say contact us on LinkedIn, you can also send a message to info@OKO.finance, and we'll try to get back to you.

Damola  32:47 
That's awesome. Thank you very much again, for  coming on. It's been a pleasure speaking and I mean, goodluck with the future. And and we definitely would love to continue to be a part of this success. Get to hear about what you're doing and maybe be a part of some of the expansion that you are hoping to do in the West African space.

Simon Schwall  33:10 
Well, I will keep you updated. And we'll be happy to tell you more when we have new country launches or a new product countries.

Damola  33:20 
Awesome. Awesome. Thank you.

Folumy  33:22 
Thank you very much.

Simon Schwall  33:23 
Thank you guys.

Damola  33:26 
Hi, and I hope you did enjoy that conversation quite interesting one. Do ensure that you continue to listen to our podcast and share as well with your colleagues and friends; future episodes and even previous ones on Apple, Spotify, Google podcasts on every platform that you get your podcast

Folumy  33:47  
right and also don't forget to join the conversation on all of our social media platforms. You might have comments within us as well as questions. Please do share on our LinkedIn page or Twitter page as well as remember to follow us.