Pilot microinsurance program has a successful payout to over 1,800 Ethiopian farmers after drought

Boston, MA – Oxfam America, Swiss Re and the International Research Institute for Climate and Society
(IRI) announced today that their innovative microinsurance program for small scale farmers in Northern Ethiopia had its first successful payout to affected policyholders this past weekend.  They were joined by their partners, the Relief Society of Tigray, Dedebit Credit and Savings Institution, Nyala Insurance Company, and Africa Insurance Company, in making the announcement.

More than 1,800 farmers in seven villages experienced drought conditions that triggered payouts.  Each will get a share of the total $17,392 in payouts.

"The recent payouts show how even the poorest communities in Ethiopia can benefit from insurance when implemented through innovative programs such as HARITA," says Christina Ulardic, Head Market Development Africa for Swiss Re's Corporate Solutions business. "Swiss Re is proud to be associated with this groundbreaking initiative and, together with its partners, is committed to helping build a viable risk transfer market in Africa."

The HARITA (Horn of Africa Risk Transfer for Adaptation) pilot was designed as a way for Ethiopia’s poorest farmers to get weather insurance for their crops, allowing more than 13,000 this year to buy themselves a bit of security against changing weather patterns.  The project is funded by the Rockefeller Foundation and Swiss Re.

“Last season the rain was bad and we didn’t produce what we had hoped for,” said Gebre Kiros Teklehaimanot, a policyholder. “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.”

“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.

In its three years of delivery, this pilot, HARITA has scaled up from 200 enrolled households in one village in 2009 to over 13,000 enrolled households in 43 villages in 2011.

“It is wonderful to see this pilot working for farmers,” said David Satterthwaite, microinsurance program manager at Oxfam America.  “This is a great moment that comes on the heels of the announcement that we, with additional collaborators and support, will scale up the pilot over the next five years and expand into Senegal.”

The United Nations World Food Program (WFP) and Oxfam America, supported by the United States Agency for International Development (USAID) and Swiss Re respectively, have committed to expand HARITA, now known as the “R4 Rural Resilience Initiative" to help the rural poor to protect their crops and livelihoods from the impacts of climate variability and change, including drought. 

R4 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).