African droughts: Could insurance schemes help out?

Despite the tough farming terrain in Ethiopia's north, Desta Giday tripled the wheat yield on his 2.5-hectare plot last year. The technical difference came from fertilizer. But what fundamentally changed the wiry farmer's output was his decision to take a larger loan from a village cooperative – something he was willing to do because of insurance.

After paying off the $90 loan with grain proceeds of around $300 and with a $15 payout for partial drought from insurers, Mr. Desta and his wife were able to buy clothes for their six kids and stash away $17 in a savings institution. Although villagers were initially sceptical about investing in insurance policies that do not guarantee returns, "after the payout everybody is aware and wants to register," he says.

The insurance is part of a rethinking among donors and African governments on how best to deal with chronic drought in Africa. More than 13 million people in Somalia, Ethiopia, Djibouti, and Kenya still require assistance in a humanitarian crisis that "unfolded despite having been predicted," a report last month by Oxfam and Save the Children said. "Governments, donors, the UN and NGOs need to change their approach to chronic drought situations by managing the risks, not the crisis," they concluded.

Providers of insurance for governments and farmers in the region have taken that message on board. As well as providing lifesaving payouts when rains are forecast to fail, the initiatives can also offer farmers the security to invest to boost yields by covering inputs, like seeds and fertilizer. For rain-reliant crop growers, the safety net provided by selling surpluses is the only long-term defense against erratic weather. It's an idea that has possible applications not just in the Horn of Africa, but across much of the continent. 

Desta is one of 13,000 farmers in Tigray region who was involved last year in a three-year-old pilot project run by Oxfam America and Ethiopian charity the Relief Society of Tigray (REST) called Horn of Africa Risk Transfer for Adaptation.

While Tigray's chasms and rocky outcrops create a spectacular landscape, it is difficult to farm. The region suffered severely in the 1983-85 famine and around 85 percent of its 4.3 million people rely on rain-fed agriculture for their livelihoods, according to REST's insurance coordinator Menegesha Gebremichael.

Like many others, Desta did not have the cash to pay for his $23 insurance premium, which covers up to $92 of inputs, so instead he paid in labor - in his case, 40 days of composting. Those paying in kind are part of the donor-funded Productive Safety Net Program, an innovative scheme in itself that offers cash or food to almost 8 million struggling Ethiopians, often in return for work on small public works like roads and ditches.

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