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April 19, 2019

Index-based Insurance to benefit Smallholder Farmers through JICA Project

If the rains fail, if they come too late or if they do not fall as much as expected, the effects on smallholder farmers can be catastrophic. In 2016, due to El Nino, the rains did not fall as expected during the rainy season in Ethiopia. The drought that followed affected tens of thousands of people and the farmers lost their crops and livestock. While the weather cannot be controlled, it is important to install measures that can help farmers' buildup reliance to the effects of drought. One measure is to develop index-based crop insurance system that will allow farmers to reduce the risks associated with shortage of rainfall, erratic rainfall patterns and drought.

At the request of the Ethiopian government to further build on a previous project on rural resilience enhancement, JICA launched the "Index-based Crop Insurance Promotion (ICIP) project" on April 19, 2019. The five-year project will not only focus on providing insurance to farmers, but will provide bundled packages of agricultural support such as farming technology, fertilizer, seeds and microfinance. These bundled packages, called Resilience Enhancement Packages (REPs), will ensure that several options are made available to the farmers based on their agro-ecological locations and farming systems. The REPs provide a way to minimize two types of risks for the farmers, risk control and risk finance. They control risk by providing water saving technologies, providing seed, fertilizer, or providing microfinance. These are bundled with weather-index crop insurance, which minimize risk finance.

JICA will be working with the Ministry of Agriculture (MoA) and the Oromia Bureau of Agriculture and Natural Resources (OBoANR) to promote index-based insurance among six target zones in Oromia Region. This project is unique in that it will also require the close collaboration of local insurance companies to design packages that will be beneficial to the farmers as well as worthwhile for the insurance companies.

It is expected that the project will insure 20,000 farmers within Oromia Region in the next five years. The long-term goal is for the Government of Ethiopia to scale-up and disseminate index-based crop insurance nationwide.

PhotoKick-off meeting for Index-based Crop Insurance Promotion project with representatives from JICA, MoA, OBoANR, the Ministry of Finance and the Agricultural Transformation Agency (ATA).


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