Sustaining smallholder farmers’ livelihoods through rainfall-deficit-index-based crop insurance in drought-prone areas: lessons from Ethiopia

Abstract

The main objective of this article is to assess the contributions in sustaining the livelihoods of smallholder farmers of rainfall-deficit-index-based crop insurance pilot project based on haricot beans implemented in Ethiopia in 2009. Based on crosssectional data, assessment results revealed that crop insurance has a potential in sustaining the livelihoods of smallholder farmers, but that there was a problem of information flow, belated payout and inadequate consideration of farmers’ preferences. Scaling-up crop insurance scheme in the future increasingly depends upon building farmers’ knowledge on how the scheme works, through proper agricultural extension services and farmers’ active participation. Signifying crop insurance as an appropriate risk management strategy, the article underlines the importance of public extension services besides appreciating farmers’ motivations to take over the management and leadership of their own affairs when existing structures are not responsive in the context of practicing crop insurance.

Keywords: Crop insurance, rainfall deficiency, payout, smallholder farmers, pilot project.