Nearly a billion people on our planet are hungry, and climate change—bringing unpredictable weather and disruption of harvests—could make things worse. That’s why Oxfam and the United Nation’s World Food Programme have joined forces to raise $28 million for the expansion of an innovative pilot program that offers weather insurance and other risk management tools to help some of the world’s poorest farmers adapt to climate change.
Insurance is a buffer against hard times. But unlike traditional programs which cover the actual value of what is lost, weather insurance provides a pre-determined payout when troublesome weather occurs during a fixed time—such as a shortage of rain at a critical juncture in the growth of a crop. The cost of administering weather insurance is lower than traditional insurance, and that means it’s more affordable. What makes this new model even more attractive is that cash-poor farmers can pay for their premiums with an asset they have in abundance: their labor.
But the insurance is just one piece in a package of strategies designed to help farmers reduce the many risks they face in eking a living from often hostile environments. The work farmers do for their premiums has an extra benefit, too: It’s designed to reduce a community’s risk to future disasters. Projects like tree planting or composting can help reverse environmental degradation and boost an area’s resilience.
Access to credit is yet another component in this holistic risk management strategy. When farmers are able to take smart risks—taking out loans to purchase better seeds that could increase their harvests, for instance—that can boost their annual incomes and ensure they’ll have a way to continue feeding their families.
As a partner in the expansion of this initiative, the World Food Programme brings a well-established infrastructure for offering food-and-cash-for-work opportunities to countless people around the globe. And like Oxfam, it has a great deal of experience in helping people develop sustainable livelihoods. Together, the two organizations will accelerate the reach of this innovative program. Through this partnership, farmers will be able to pay for insurance by working on irrigation and forestry projects in World Food Programme’s food-and-cash-for-work programs.
The expansion will build on the success Oxfam and its local and international partners have had with the pilot they launched in 2009 in Adi Ha, a rugged highland community in northern Ethiopia frequently plagued by drought. In its first year, the program offered weather insurance for one crop, teff, a tiny grain grown across the country and a staple of the Ethiopian diet. Two hundred farmers—many of them women—invested in a policy.
“Because of repeated drought, which really affected me, I joined the insurance with the understanding it might solve my problems,” said Medhin Reda, a single mother and one of original Adi Ha participants. “It’s good for me to have the insurance as long as I can work and pay with labor. That is the only asset I have.”
Though the weather was not bad enough to trigger a payout in 2009, high renewal rates in Adi Ha indicate the program is responding to a real need. With additional pilots underway in four more Ethiopian communities and three more crops—barley, sorghum, and wheat—added to the coverage, the program is poised for international expansion into three other countries in the next five years.
“Insurance is more than a cushion that softens a blow,” says David Satterthwaite, Oxfam’s senior global microinsurance officer. “It can serve as a solid step out of poverty. It not only speeds the recovery of farmers with a cash payout so they can meet their immediate expenses, but it can make it easier for them to get credit and plan for the future. With loans, farmers can start small businesses or buy better seeds and fertilizer that will boost their production.”
Oxfam began developing this pilot in 2007, when it started a collaboration with a group of partners including Swiss Re, the International Research Institute for Climate and Society, and the Relief Society of Tigray, an Ethiopian development organization also known as REST. The team melded the financial muscle of the private sector, the exactitude of the scientific community, and the invaluable knowledge of a well-respected local aid group to forge a program designed to truly serve the needs of the people for whom it is intended—launching an innovation or two along the way.
For Oxfam, one of those innovations has been the strong working relationship it has developed with Swiss Re.
“This is an opportunity for Swiss Re, other private sector partners, and Oxfam America to work together on a new direction that is long overdue in the developing world and that is helping farmers become more resilient to changing weather patterns,” said Satterthwaite. “Oxfam believes companies should be able to expand their operations as long as their business is being conducted fairly. In this instance, Swiss Re is helping to design a solution that could potentially help poor people fight poverty and the often debilitating effects of changing weather patterns.”
For farmers, perhaps one of the best innovations of the program is the labor component—trading sweat for premiums—allowing the poorest among them the means to participate. In Ethiopia, this is being accomplished through the country’s Productive Safety Net Program, a government-run food-for-work initiative that helps about 8 million people a year. Farmers participating in that program are eligible to exchange extra labor on community-based projects for their premiums. In the first year of the pilot, Oxfam picked up the cost of that exchange, but with the new partnership, the organization is seeking public and private investors to support the program and help cover many more farmers in Ethiopia and beyond.
“While least responsible for climate change, poor people bear the brunt of its impacts,” said Satterthwaite. “Innovations like our weather insurance pilot could help change that equation, giving farmers the tools they need to survive—and thrive.”
And now, through the partnership with the World Food Programme, a good idea sown in Ethiopia is set to grow across the African continent.