MICROCAPITAL BRIEF: Oxfam America, World Food Program (WFP) Offer Crop Microinsurance for Ethiopian Farmers in Return for Labor

Oxfam America, a subsidiary of UK-based relief agency Oxfam International, and the World Food Program (WFP), a unit of the United Nations (UN), have developed a crop insurance initiative that allows Ethiopian farmers to acquire microinsurance policies in return for either cash or labor, extending WFP’s existing food-and-cash-for-work program [1]. The microinsurance provides cover against drought using a rainfall index, wherein a farmer is paid if rainfall occurs at or below a level that is likely to result in poor agricultural output. Instead of paying cash for the insurance cover, farmers have the option of working on local forestry, soil and irrigation projects that are meant to mitigate the effects of climate change [2].

David Satterthwaite, a senior global microinsurance officer at Oxfam and the owner of MicroCapital explains that, “It not only speeds the recovery of farmers with a cash payout so they can meet their immediate expenses, but it can make it easier for them to get credit and plan for the future” [2].

In 2009, 200 families took out policies insuring their teff crops for a total value of USD 2,500, with two thirds providing labor and the others paying cash. In 2010, the program grew to cover 1,300 farmers in five villages raising crops including wheat, barley and sorghum. During 2011, Oxfam and partners are expecting to reach 45 villages and 13,000 families [1].

By Rohan Trivedi, Research Associate

About Oxfam International:
Oxfam International was established in 1995 as a confederation of 14 organizations working to reduce poverty. Oxfam’s name is derived from its founding member, the Oxford Committee for Famine Relief, which began operating in Britain in 1942 advocating for food supplies to be sent to Greece during the Second World War to aid women and children. Throughout the last 60 years, Oxfam International has grown into a network of member organizations serving 99 countries with disaster relief, advocacy, policy research and the aim of providing long-term solutions for poverty eradication. As of March 2010, Oxfam International reports GBP 2.4 million (USD 3.9 million) in assets.

About World Food Program (WFP):
World Food Program (WFP) is a United Nations agency tasked with providing food aid. The organization is guided by five objectives: (1) prepare for emergencies, (2) save lives and protect livelihoods during emergencies, (3) restore and rebuild lives after emergencies, (4) strengthen the capacity of countries to reduce chronic hunger and (5) reduce undernutrition. WFP planned to deliver 3.7 million tons of food to 90 million people in 2010.

Sources and Additional Resources:

[1] New York Times: “To Survive Famine, Will Work for Insurance” by Tina Rosenberg, May 12, 2011, http://opinionator.blogs.nytimes.com/2011/05/12/to-survive-famine-will-work-for-insurance/

[2] Oxfam America: “Oxfam teams up with World Food Programme to expand risk management for poor farmers”, http://www.oxfamamerica.org/articles/oxfam-teams-up-with-world-food-program-to-expand-risk-management-for-poor-farmers/?searchterm=satterthwaite

MicroCapital Universe Profile: Oxfam International, http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Oxfam+International

MicroCapital Universe Profile: World Food Program (WFP), http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=World+Food+Program+%28WFP%29

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