The UN World Food Program (WFP) is proposing a radical solution to the recurrent problem of famine and malnutrition in Ethiopia: weather insurance, writes the World Bank press review Wednesday.
Ethiopia is the worlds biggest annual recipient of per capita emergency aid, but 300.000 children in the country die every year as a result of poor nutrition – the equivalent of a tsunami disaster every year – according to the UN. Clearly, there is a need to explore new ways to help Ethiopia with its chronic food shortages, says Richard Wilcox, who devised the weather insurance scheme at WFP.
The WFP plans to launch the scheme in Ethiopia early next year with technical support from the World Bank, which is just beginning a number of small-scale weather insurance pilot projects in Africa.
A similar scheme has been tested successfully in Andhra Pradesh in India, funded by a Hyderabad-based microfinance institution with support from the World Banks Commodity Risk Management Group. The aim of the Ethiopian pilot scheme would be to help farmers survive the drought and retain their farm tools, so that they can recover their livelihood once weather conditions improve.
Famine in Ethiopia is made significantly worse by the fact that poor farmers sell their equipment and livestock – often at below market prices – in order to buy food as soon as a drought takes hold. By the time farmers receive the aid – typically four or five months later – they have long since sold their assets, leaving them trapped in a state of dependency.
The WFP proposes that insurance contracts should be based on a rainfall index, which correlates with historic, drought-induced food needs.
The amount of rainfall will be measured and if the index falls below the trigger line on the graph, suggesting a drought severe enough to warrant food aid, the insurance company will issue a payout which will be used to fund relief.
Premiums will be met by donors, who will direct funds to commercial risk-taking entities such as reinsurance companies to cover the cost of the policies.
Kilde: www.worldbank.org
