Madajewicz, Malgosia; Haile Tsegay, Asmelash; Norton, Michael, 2013, Managing Risks to Agricultural Livelihoods: Impact Evaluation of the Harita Program in Tigray, Ethiopia, 2009–2012, Impact evaluation

2.4 APPROACHES TO ENHANCE LIVELIHOODS, EQUITY AND INCLUSION

2.4.3. Social protection

Recommendation: 5) Ensure that project beneficiaries are provided with the best available insurance solutions in line with their needs and their disposable assets. Obtain workers’ opinion and insights to understand which option could be considered as the most suitable.

Reference: Madajewicz, Malgosia; Haile Tsegay, Asmelash; Norton, Michael, 2013, Managing Risks to Agricultural Livelihoods: Impact Evaluation of the Harita Program in Tigray, Ethiopia, 2009–2012, Impact evaluation, OXFAM America, Boston.

Evidence sample: the evaluation concludes that the Harita Programme in Ethiopia made large use of the “weather index insurance” (WII). The WII[1] is a relatively new but innovative approach to insurance provision that pays out benefits on the basis of a predetermined index (e.g. rainfall level) for loss of assets and investments, primarily working capital, resulting from weather and catastrophic events, without requiring the traditional services of insurance concludes assessors. It also allows for quicker and more objective insurance settlement processes to be.

The project made payments contingent on recorded rainfall rather than yields. Basing payments on rainfall eliminated the costly moral hazard problems involved in verifying yields on smallholder farms and therefore made the premiums more affordable. In the event of a seasonal drought, insurance pay-outs were triggered automatically when rainfall dropped below a pre-determined threshold at a pre-determined time during the growing season. HARITA relied on satellite data for rainfall measures.

How to pay for this insurance? In the HARITA team’s conversations with farmers, the farmers themselves suggested a solution – they could pay for insurance with their labour. Oxfam America worked with the Relief Society of Tigray and the Government of Ethiopia to build an “insurance-for-work” program on top of the government’s “food- and cash-for-work” Productive Safety Net Program (PSNP), a well-established program that serves eight million chronically food-insecure households in Ethiopia. The resulting innovation allowed cash-poor farmers who were PSNP participants the option to work for their insurance premiums on the risk reduction activities. During the 2010 growing season, 80% of farmers who bought insurance were PSNP participants who paid with labour, while in 2012 93% paid with labour in those villages in which farmers had the option to pay with labour. Risk reduction activities began after farmers had purchased insurance since the amount of insurance purchased determined the amount of labour that farmers had to provide.

The evaluation points out that the insurance pay-out may improve livelihoods by allowing farmers to preserve food consumption and/or their asset holdings after a drought and to repay their loans. Farmers who receive an insurance pay-out may not need to sell assets in order to feed their families and to repay loans. Therefore, farmers may maintain higher yields in subsequent seasons, preserving food security and livelihoods. These effects may also influence migration patterns since men from farming household may be less likely to migrate if livelihoods at home improve.

The second effect is on productive investments and consumption in growing seasons with good rainfall. The threat of drought may cause farmers to invest less in all seasons and to avoid borrowing to finance investments because farmers worry that investments will be wiped out by drought. The promise of an insurance pay-out that will help to repay loans and buy food in case of a drought may enable farmers to increase investments, translating into higher yields, assets, and incomes in good seasons, and therefore improved food security and livelihoods in all seasons.