An innovative crop insurance program that protects small African farmers against extreme weather made its first payouts last week, to growers in northern Ethiopia. The pilot “microinsurance” program gave a total of $17,392 to 1,800 farmers in seven villages, following a drought earlier this year.
The HARITA (Horn of Africa Risk Transfer for Adaptation) pilot was designed as a way for Ethiopia’s poorest farmers to insure their crops against changing weather patterns. Instead of asking farmers to document actual crop losses, the program uses a weather index; when thresholds of abnormal rainfall or temperature presumed damaging to crops are reached, they trigger automatic payouts. This makes the claims process simpler and lowers premiums by easing the administrative burdens of traditional crop insurance. Since starting in 2009 with 200 enrolled households in one village, the project has gone to more than 13,000 households in 43 villages.
The announcement was made by the program’s partners, which include
Oxfam America and the Earth Institute-affiliated International Research Institute for Climate and Society (IRI). They are working with the Relief Society of Tigray, Dedebit Credit and Savings Institution, Nyala Insurance Company, and the Africa Insurance Company. The project is funded by the Rockefeller Foundation and the insurance company Swiss Re.
“If the insurance helps farmers cover fertilizer loans in the worst years, farmers could use these loans to increase yields in the rest of the years. This has the potential to really improve a farmer’s situation,” said Daniel Osgood, an economist at IRI who specializes in index insurance.
One policyholder, Gebre Kiros Teklehaimanot, said, “Last season the rain was bad and we didn’t produce what we had hoped for. So the payment is good for us. We know it won’t cover all our losses, but for me, at least, I can cover the loan I took to buy fertilizers. I am still a big believer in insurance and will go back to my village and encourage others who did not register last year.”
The United Nations World Food Program and Oxfam America, supported by the United States Agency for International Development and Swiss Re have committed to expand HARITA, now known as the “R4 Rural Resilience Initiative.” The R4 organizers say the project will enable poor farmers to strengthen their food and income security by managing risks through a four-part approach: improving natural resource management (community risk reduction), accessing microcredit (“prudent” risk taking), gaining insurance coverage (risk transfer), and increasing savings (risk reserves).
