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Largest Weather Index Insurance Payout for Small Scale African Farmers Triggered by Satellite Technology

Targeted News Service

BOSTON, Dec. 6 -- The Rockefeller Foundation issued the following news release:

Today Oxfam America and The Rockefeller Foundation announced a weather index insurance payout of unprecedented scale directly to poor farmers. Thanks to a groundbreaking new program that relies on advanced satellite technology, more than 12,200 farmers in 45 villages in Northern Ethiopia will benefit from drought protection. As a result of this year's drought conditions each farmer will receive a share of the total $322,772 in payouts offered through the Horn of Africa Risk Transfer for Adaption Program (HARITA) to help cover crop losses.

Oxfam, with funding from The Rockefeller Foundation, partnered with Swiss Re, The International Research Institute for Climate and Society (IRI), the Relief Society of Tigray, Dedebit Credit and Savings Institution, Nyala Insurance Company, and Africa Insurance Company to start HARITA in 2007. Last year, The United Nations World Food Program (WFP), supported by United States Agency for International Development (USAID) and Oxfam expanded HARITA, now known as the "R4 Rural Resilience Initiative" to help poor farmers protect their crops and livelihoods from the impacts of climate variability and change, including drought.

"In the history of weather index insurance programs, this is the first-ever set of large payouts directly to small scale farmers in Ethiopia," said David Satterthwaite, senior global micro-insurance manager at Oxfam America. "Until now payouts have been for small pilots. But at this new scale, we are proving that weather insurance can be a successful and market-ready financial product. These kinds of products are the new face of development: They empower people to take chances and build a better future for themselves."

"With today's changing climate, crop insurance has become a critical tool in building the resilience of some of the world's most vulnerable populations," said Dr. Judith Rodin, President of The Rockefeller Foundation. "With this first significant payout, we clearly see the impact of innovative insurance products that can reach the poorest small holder farmers by utilizing the most current technology. We can provide farmers with no better form of food security than by empowering them to protect themselves from the impacts climate change."

"We used to be blocked because it was too expensive, if not impossible, to get drought and crop loss data in time to help the farmers," said Dan Osgood, an economist at IRI. "This payout was triggered by rainfall estimates measured by the same cutting-edge satellite technology used by NASA and NOAA, but engineered together with Ethiopians to target their risks and vulnerabilities. This allowed us to calculate the payouts just as crops were beginning to suffer, so farmers will get the money when they need it most." In many rural areas, disaster often strikes poor farmers hard, forcing them to make choices that drag their families deeper into poverty. To survive, they might have to sell their tools for cash to buy food, or take their children out of school to save on fees. With weather insurance, farmers can protect the investment they make in their crops, and feel confident in taking out loans for fertilizer and better seeds to improve their harvests.

The R4 project has scaled from 200 households purchasing insurance in one village in 2009 to more than 18,000 enrolled households in 76 villages this year. Farmers have been able to purchase insurance with cash, or for the first time, partially with cash and partially with labor. As a progressive step toward building a commercial insurance market in rural Ethiopia, R4 is strategically expanding to areas where farmers are capable of paying for insurance with cash, while continuing to serve the poorest and most vulnerable farmers through government's Productive Safety Net Programme, using the project's innovative Insurance-For-Work (IFW) model. The products are priced at commercially viable rates for both, cash-paying farmers as well as for farmers purchasing through the IFW program.

"Access to finance and risk management is pre-requisite for financing investments into better farming technology, hence increasing incomes. With this in mind Swiss Re engages in developing solutions for small holder farmers around the world," said Christina Ulardic, Head Market Development Africa, Swiss Re Corporate Solutions. "We are glad to see that the product developed for the Ethiopian farmers does what it is designed for; financially compensating farmers during years of adverse weather conditions."

This innovative public-private partnership is expanding from Ethiopia to Senegal over the next four years. R4 enables 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).

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Copyright:(c) 2012 Targeted News Service
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