Ethiopia launches crop insurance against weather risks
Source: Middle East Insurance Review | Apr 2016
A group of organisations in Ethiopia has collaborated to launch a crop insurance cover, based on Normalised Difference Vegetation Index (NDVI) for smallholder farmers.
The Public Financial Enterprises Agency of Ethiopia (PFEA), Ethiopian Insurance Corporation (EIC), Agricultural Transformation Agency (ATA), Kifiya Financial Technology (KFT), National Metrology Agency (NMA) and ITC University of Twente in the Netherlands, aim to insure smallholder farmers against weather-related risks. The scheme envisages covering 200,000 smallholder farmers in 2016 and 15 million over the next five years.
NDVI’s crop insurance will be applied based on the inputs smallholder farmers spent to produce their crops. The farmers are expected to pay a premium of around 10% of the total cost of the inputs, such as fertiliser, basic seeds, herbicides and pesticides they use to produce crops. In the event that the crop fails due to weather, the farmer will get back total investment on inputs from EIC.
In Ethiopia, over 15 million smallholder farmers are engaged in subsistence farming, which is traditional and rain-fed with very limited areas under irrigation. Natural disasters such as drought, floods and pests are the major calamities badly affecting crop production in Ethiopia. Estimated losses due to disasters in the past decade have been estimated at ETB2.5 billion (US$117.1 million).
ETB1 = US$0.05