New Crop Insurance Initiative Offers Farmers Lifeline

Farmers received a lifeline as Ethiopia’s latest agricultural insurance initiative came off age to compensate them for crop failure last year.

The public private partnership initiative reached 122,000 smallholder farmers in Meher 2023 protecting them against various climate risks.

Last Friday, the partners came together in Addis Ababa to witness the program pay 39 million birr to farmers who incurred losses.

In a response to pressing need for climate risk solutions in the country, the Agricultural Transformation Institute (ATI), World Food Programme (WFP), and an international insurtech firm, Pula Advisors, initiated the crop insurance scheme last year.

The initiative, which aims to protect farmers against many risks, was executed by key Ethiopian stakeholders with support from international experts.

Pula Advisors designed and executed the first phase of the Area Yield Index Insurance based on remotely sensed rainfall estimates following extensive research and a benchmarking visit.

The endeavor also bundled crop insurance with Input Voucher System (IVS) – a formal input distribution channel in Ethiopia – to expand reach and further enhance affordability by dispersing risk across a larger base.

The straightforward approach whereby farmers access insurance when they buy their inputs resulted in the largest-ever crop insurance program in the country, the partners say.

The initiative primarily insured inputs, particularly fertilizers, for farmers in Amhara Region, with a plan to extend its reach to 7.5 million farmers across various regions utilizing the IVS infrastructure.

“Before this program, insurance coverage neglected the needs of the poor and vulnerable,” noted Mushera Sisa, head of development centers at the Amhara Regional Bureau of agriculture.

Their priority, he said, was always for property owners, overlooking the largest population group contributing to the economy – the farmers.”

The new initiative has changed this, according to Mushera.

“Pula has delivered unparalleled value to our farmers in the region,” he said of the insurance project, in which Amhara Regional Bureau of Agriculture was a policyholder on the insured farmers’ behalf.

Private insurer Oromia Insurance Company (OIC), meanwhile, underwrote the risk and issued policies while Tsedey Bank was the distribution partner.

The public-private partnership eventually proved effective in bolstering the resilience of the insured farmers, according to Pula’s official.

In the loss assessment conducted by the insurtech firm and OIC, farmers in two woredas were identified to have witnessed major crop losses.

Per the duo, pests and diseases significantly affected crops and reduced yields by the end of the Meher season, triggering insurance payout to 52,000 smallholder farmers.

The official payout cheque was presented to the Bureau of Agriculture on behalf of farmers last Friday in an event held at Hyatt Regency.

Pula’s Country Manager Dagmawi Haileyesus said: “the resounding success of Meher 2023, the largest crop insurance initiative by farmer reach and payout, has underscored the potential of this approach.”

“Looking forward,” he said, “our current achievements hold promise for reaching up to 50% of rural households in Ethiopia.”

Apart from empowering farmers, the initiative showed private insurers the way out to some of the challenges they face in expanding crop insurance.

“One of the primary hurdles in expanding crop insurance has been affordability and ineffective distribution channels,” OIC’s CEO Tegistu Shiferaw said.

“Pula’s new approach has facilitated their ability to reach a significant number of farmers successfully, achieved through the innovative bundling of insurance with the IVS system”.

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