Ethiopia: Micro-Insurance in Mitigating Uncertainty in Agricultural Production

Feb 10, 2021 | The Ethiopia Herald - All Africa

To fight poverty and improve productivity, small-scale farmers who are facing financial constraints and trapped in a subsistence way of living should be integrated into the market.

To realize this, the role of microfinance and insurance should receive due emphasis. One of the bottlenecks in improving the lives of the poor is lack of access to finance and credit.

According to some documents, one of the various instruments that reduce poverty in rural areas is through facilitating access to credit to the poor. As formal financial institutions failed to reach the poor for collateral requirements, micro finance program that provides services such as credit, saving and insurance is seen as an alternative strategy to reduce poverty.

Currently, both public and private banking and insurance sectors are booming. But, due to the rule of the game, their loan and insurance facilities are not accessible to the low economic groups as they have neither the property that can be utilized as collateral nor the payment for premium, said Mekonnen Abera, an economist.

To improve access to finance both in urban and rural parts of the country, several saving and credit associations have been established. They have also created an opportunity for low-income earners to access such services.

As to him, the the members established the corporation based on rules and regulations to govern its activities. Members are benefiting from credit services as per their saving.

Contrary to the situation in urban areas where it is possible to start small businesses by accessing credit from small micro-finance institutions, it is much difficult in rural areas to utilize these services to expand agriculture as agricultural inputs are expensive even in the case of small-scale farmers.

Hence, it is beyond their capacity to access the required amount of loan. Hence, the involvement of microinsurance enterprises in small farming is essential to boost farmers' morale and inspire them to do their work vigorously.

According to him, with the view to garner the long-term benefit and discharge their corporate social responsibility, private companies in collaboration with the government and stakeholders have been venturing to provide microinsurance services.

Due to its huge significance, such kind of initiative needs to be appreciated and other financial institutions should follow their footsteps... Read more on All Africa


Source: All Africa