Ethiopia has initiated a process to sign the African Risk Capacity Treaty and an MoU with insurers ARC Ltd and PULA in a bid to de-risk its smallholder farmers.
The latest move, officials say, intends to help smallholder farmers better prepare, plan and respond to extreme weather events, and other risks.
Most smallholders in Ethiopia rely on rain-fed agriculture, leaving them vulnerable to the impact of agricultural and climatic risks.
The country’s exposure to desert locusts further threatens the national economy, prompting authorities to seek pre-emptive strategies.
“Ethiopia’s hazard profile is dominated by various risks such as droughts, floods, desert locusts, and diseases that result in hunger and conflicts,” said Agriculture Minister Oumer Hussein.
“We now need the Government to be involved in providing a relevant insurance solution to build our farmers’ resilience and profitability. And we need to do this at scale.”
The minister said the government is now working with the African Union to sign the ARC Treaty and the Memorandum of Understanding with ARC Ltd and PULA.
The MoU will set out the terms, conditions, and a framework to facilitate cooperation between the Government of Ethiopia, ARC Ltd, and PULA.
“We need to build many partnerships to make this a sustainable reality for our farmers,” said Agriculture Minister Oumer.
The engagement with ARC to explore ways to insuring Ethiopian farmers was initiated in June 2022 by the Agricultural Transformation Institute (ATI) and PULA.
ARC ‘ready for work’
ARC’s CEO Lesley Ndovu sees insurance as “an ideal instrument to protect farmers and the GDP” of Ethiopia and other African countries.
Ndlovu conveyed ARC’s “readiness to work” with the Ethiopian smallholder farmers and Pula to “accurately profile their natural disaster risks and design “quantified response plans to better secure the lives and livelihoods of vulnerable populations”.
The ARC, with 35 countries as signing members, has supported insuring over 30 million farmers since 2012.
“Joining the ARC treaty comes at no cost. There are no financial obligations for the member countries and we look forward to Ethiopia becoming our 36th member state,” Ndlovu stated.
The Ethiopian Agricultural Transformation Institute says it is now tasked to develop and deliver the insurance product in collaboration with various Ministries, financial institutions and farmers.
The institute is expected to make the insurance scheme available for farmers through its input Voucher System (IVS) in the coming Meher, Ethiopia’s main grain growing season.