APPROACH AND METHODOLOGY
The first step in 2011 will be training workshops in Ethiopia to build the capacity of local financial service partners to manage the weather index contracts that were developed in 2009 and 2010, and develop processes for adapting these contracts to variable conditions in 50 villages. The program will also convene a local design team in each village, where local partners can collaborate directly with villagers elected by their peers. These villagers will participate in product design questions and act as a liaison between local partners and the broader community. Drawing on information gathered from these design team discussions, the local partners will propose adapted index contracts to each local design team.
Once the contract is developed, a series of outreach and education activities are conducted in each village to raise awareness of insurance concepts, the particular contract for that village, the tradeoffs in various risk management methods, and information about contacting an ombudsman to resolve any contract disputes. Farmers will then have an opportunity to purchase the financial package with cash or labor. Farmers who are part of Ethiopia's Productive Safety Net Program may earn their insurance premiums by completing disaster risk reduction projects in their communities. Once equipped with the security of the financial package, farmers may then begin the crop season with increased confidence and freedom to make credit-led investments that can lead to better livelihoods and the gradual accumulation of wealth.
With improvements in our outreach methods, we estimate that we will enroll an average of 300 households per village (approximately one third of eligible households), for a total of at least 15,000 households across 50 villages during the 2011 season. With an average household size of 6 people, we expect to directly affect approximately 80,000 people. The remaining two thirds of the village populations (160,000 people) will have an opportunity to learn through their social networs about micro-insurance and improved risk management concepts.
As the season commences, the program will evaluate the enrollment results through surveys and focus groups. (Impact assessments will be conducted later, after the close of the season and beyond the timeframe of this commitment.) Local partners will also be engaged in preliminary planning for the following season. Finally, coordination with local partners will occur to ensure a prompt payout in the event that the weather index is triggered during the crop season.
IMPLEMENTATION, TIMELINE, AND DELIVERABLES
The timeline is as follows:
Quarter 1 (Nov 2010 - Jan 2011)
Capacity-building workshop in Ethiopia on index insurance and methodology
Collaborative design team meetings in 50 villages in Ethiopia
Quarter 2 (Feb 2011 - Apr 2011)
Adaptation of index contracts for 50 villages in Ethiopia
Capacity-building workshop in Ethiopia on support of products, analysis and selection of new sites
A visit to Mali to explore with stakeholders the feasibility of extending the project to Mali based on SfC infrastructure
Quarter 3 (May 2011 - Jul 2011)
Financial literary and education in 50 villages in Ethiopia
Enrollment for financial package in 50 villages in Ethiopia
Risk reduction activities in 50 villages in Ethiopia
Pre-season evaluation of enrollment results in Ethiopia
A conference in Mali to discuss risk management frameworks and explore options for implementing pilot
Quarter 4 (Aug 2011 - Oct 2011)
A public report assessing 2011 enrollment, current risk management model and market development model
A conference in Ethiopia to discuss risk management frameworks and explore possibilities for scale
Farming is an inherently risky activity, but no more so than in developing countries. Most of the world's poor and hungry communities live in rural areas where small-scale agriculture constitutes the main economic activity. Farmers worry about a range of issues including poor rainfall, pests, low harvest levels, and weak market conditions. Season after season, smallholder farmers go to great lengths to improve their situation.
For the last three years, Oxfam America, Swiss Re and IRI have been working with courageous farmers in Ethiopia to develop a comprehensive climate risk management package that puts their needs and rights at the center, and helps them to cope with a changing climate.
The collaboration began in 2008 in a pilot hosted and driven by the village of Adi Ha, located in Ethiopia's northernmost state of Tigray. The pilot was successfully scaled to five villages in 2010. Together with project partners in Ethiopia and abroad, they designed a people-centered climate risk management package known as the Horn of Africa Risk Transfer for Adaptation (HARITA) model. HARITA addresses the needs of smallholder producers through an innovative mix of risk reduction, weather index drought insurance, and credit, all made available in cooperation with Ethiopia's Productive Safety Net Program (PSNP). Under this unique risk management model, insurance complements disaster risk reduction and long-term, sustainable investments in agricultural production. Through the PSNP, farmers have been able to pay for insurance premiums not with precious cash, but with labor on critical public climate adaptation projects in their communities. Of the 1,308 households that purchased the insurance in 2010, 39 percent were female-headed, and 83 percent paid for insurance with labor through participation in the PSNP.
Likewise, Oxfam's Saving for Change (SfC) program, launched in April 2005, has broken ground in the field of microfinance service delivery to more than 320,000 poor women and men in Mali, Senegal, El Salvador, and Cambodia. The program has achieved broad success in creating effective, community-based savings and credit structures designed to reach rural markets traditionally underserved by institutional microfinance institutions, banks, and credit unions.
Both HARITA and SfC put farmers at the center of the rural resilience framework. The starting point is to understand the needs and choices of rural communities. From there, it becomes possible to work with villagers to develop appropriate training packages that include farmer-to-farmer exchanges and joint problem solving. Through the process, farmers slowly recognize the power of their voice to change things for the better. Farmer associations increase the political, economic, and social influence vulnerable rural communities have on programs and policies affecting their lives. By enabling members to pool resources, they increase farmers' access to information and markets; secure more opportunities to improve skills; foster continual learning; and improve bargaining power. These elements are critical for long lasting change.
Swiss Re is committed to develop and implement financial solutions helping society to adapt to a changing climate. For example in India, Swiss Re piloted weather risk transfer instruments, and since 2004 has covered more than 350,000 smallholders. Further strengthening its early implementation role, Swiss Re has launched the Climate Adaptation Development Programme in 2007 to develop a financial risk transfer market for the effects of adverse weather in emerging countries. In addition, Swiss Re has a long, successful history of providing governments, international development banks, and non-governmental organizations with tailor-made, innovative risk transfer solutions to help them cope with the financial consequences of major catastrophic events.
IRI has been at the forefront of weather index insurance initiatives and continues to be a valuable ally. Founded as a cooperative agreement between NOAA's Climate Program Office and Columbia University, IRI is part of The Earth Institute at Columbia University. IRI aims to catalyze the creation and provision of science that meets the needs of developing countries. For this commitment, IRI will provide research and technical advice on climate data and weather insurance design, as well as capacity-building activities for local partners.
In 2011 and 2012, the partners plan to merge the major features of SfC and HARITA in Ethiopia and Mali. By doing so, they will realize a fully operational and scaled rural resilience program that incorporates national safety net structures, local farmers' cooperatives, and holistic risk management strategies. The lessons and principles of these two groundbreaking programs hold the potential of effectively addressing the financial needs of poor households across Africa. In Ethiopia, the PSNP already reaches eight million farmers, providing a cost-effective channel to reach thousands of communities that wish to join the insurance program. SfC has 300,000 members worldwide, covering more than 50 percent of all villages in Mali. As such, SfC has effectively laid the foundation for the introduction of a scaled version of the holistic risk management package that has already met with success in Ethiopia. Indeed, HARITA is flexible enough to adjust to differing risk conditions at the country-to-country and even village-to-village level.
Building on the success of the HARITA pilot in Ethiopia, Oxfam America and the United Nations World Food Programme launched the R4 Rural Resilience Initiative to empower farmers and food insecure rural households with integrated risk management tools, including drought insurance, risk reduction, credit and savings. R4 constitutes a first step toward developing a sustainable insurance market for poor people, an essential factor in ensuring farmers' livelihoods and food security over the long term.
R4 is inviting donors to support the scale-up and testing of this innovative approach in Ethiopia, Senegal and two other countries in the next five years. Learn more about R4 at www.oxfamamerica.org/R4.