Friday
October 14
2011

ViewChange

W/Video Via ViewChange, Oxfam: This World Food Day, Making it Africa’s Last Famine

The author, David Satterthwaite, is Oxfam America’s head of micro-insurance and risk management and founder of MicroCapital.org. Despite the current severe drought in East Africa and resultant famine in Somalia, northern Ethiopia has thus far escaped this year’s drought. The region has, however, been devastated by lack of rainfall in the past and Satterthwaite’s program was designed to help local farmers overcome periods of severe drought. His work is featured in a World Food Day half-hour documentary special report from ViewChange and Oxfam: “ViewChange: Africa’s Last Famine,” which is available online at www.oxfamamerica.org and www.viewchange.org and broadcasts on Link TV on today (Oct. 14) and Tuesday (Oct. 18).

I woke up that day in Addis Ababa. It was a morning that I’ve come to think of as typical there: it was sunny, the air was cool with the smell of wood smoke, and slow-moving donkeys shared the city streets with blue taxis. I had been on the job at Oxfam for about a month. A group of us-a number of my Ethiopian colleagues and I-were scheduled to meet with the CEO of Nyala Insurance to discuss a contract to provide weather insurance to farmers in northern Ethiopia.

Nyala is one of the leading and most innovative insurers in the country. Its website features a photograph of a powerful mountain nyala stag with massive sculptural horns and the words “Care and Protection” artfully transcribed over the photograph. It was in this meeting, 7,000 miles from home, that I had one of those ah-ha moments. Over strong Ethiopian coffee, Nyala’s CEO told us that his entire balance sheet was USD$30 million. Here we were, talking to largest major insurer in Ethiopia, and they were operating on a balance sheet smaller than a mid-sized nonprofit in Kansas. How could they reach even a fraction of the people in Ethiopia who could benefit from having something to fall back on in hard times and that could foster confidence in good ones?

It made me think hard about the work ahead of me. What would it take to build a rural insurance market to serve the 70 percent of Ethiopian population that, as farmers, depend on rain to feed their families? Working together in public-private partnership, we needed to establish all the elements required for a market: supply, demand, data, channels, regulations, and so forth. There was tremendous need for insurance and insurers would love to meet that need, but we certainly weren’t in Kansas.

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I was hired in 2010 as a technical advisor to Oxfam’s micro-insurance project in Ethiopia. Millions of Ethiopians rely on grain and other provisions from the United Nations World Food Program to survive. Feeding hungry people is a vital service but the current system does not allow farmers who are scraping by to get ahead. As journalist Tina Rosenberg wrote in The New York Times earlier this year, “The very precariousness of the harvest makes the yield more precarious still: out of fear, farmers do not try new methods that can bring them higher yields. They cannot take out loans to buy the drought-resistant seeds and tools to bring a bigger harvest, because they cannot be sure of repaying the loans. They need to know they will have money left over to feed their families and plant again should the harvest fail, so they invest less in farming. Insecurity is a vicious circle that is starting to spin faster and faster.”

Recognizing this, several years ago Oxfam launched a program to try to break this cycle, including weather insurance as part of an effort to build rural resilience among farmers in Adi Ha, a village in northern Ethiopia. The idea behind agricultural index insurance is that if insufficient rain fails to fall during a critical period of the growing cycle, farmers get a payout to help cover their losses. This safety net gives growers the confidence to take judicious chances like investing more in their crops so they can reap a bigger harvest. In Adi Ha, the insurance was designed to cover Ethiopia’s staple grain, teff.

This insurance product is designed to be commercially viable (i.e., risk-based pricing) and to avoid subsidizing premiums as has been done in the past. It hinges on the innovation that the most vulnerable households, through the national safety net work program, can purchase insurance using their own labor. Those not in the work program can pay cash using the same delivery channel. This accessible and commercially viable offering is our strategy to build insurance markets, but it requires systemic change: many partners are required-the government, national insurers, global re-insurers, scientific research institutions, community organizations, to name a few-to build supply, demand, data, channels, volume, and, of course, trus

In 2009, 200 households in Adi Ha enrolled. Last year, 1,300 households in five villages opted to buy insurance and this year over 13,000 families in 45 villages have enrolled. This 1,000-percent growth within the same annual project cost structure delivers the desired “demonstration effect.” From the outset, the project was sponsored by Oxfam, Columbia University, global re-insurer Swiss Re, and the Rockefeller Foundation. Earlier this year, Swiss Re, announced that it would join Oxfam America and the World Food Programme as a Founding Sponsor of the Rural Resilience Initiative (R4) to expand and evaluate this approach over the next five years.

Much of East Africa is in crisis and the current famine is not its first. This season the rains failed throughout much of the region, in places triggering the worst drought in 60 years. The result is that 13 million people at now risk-with 1.8 million Somalis alone displaced. Aid groups and governments are scrambling to help, but these recurrent crises beg the question: What would it take to make this Africa’s last famine?

We can’t accurately estimate how much it would cost to prevent a disaster, but our Rural Resilience Initiative is based on the idea that it costs less to avoid a crisis than it does to save lives after famine hits. Although an imperfect science, experts estimate that emergency relief in famines costs seven times as much as preventing the disaster to begin with. So, on the eve of World Food Day, with more than 750,000 East Africans facing starvation, it’s time to look at how strategic investments could help break this cycle.

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Categories
Health Care
Tags
microinsurance, nutrition