In a landmark development for Ethiopia’s agricultural sector, smallholder farmers across the Tigray and Amhara regions are now reaping the benefits of a new, robust agricultural insurance scheme. This initiative, spearheaded by Pula Advisors in collaboration with the Ethiopian government and a network of partners, marks a significant shift away from traditional international relief mechanisms, offering farmers timely and direct financial protection against the increasing risks posed by climate change.

Agriculture at a Crossroads

Agriculture is the backbone of Ethiopia’s economy, employing millions and providing the foundation for national food security. However, the sector faces mounting threats from unpredictable rainfall patterns, prolonged droughts, and other extreme weather events, all exacerbated by climate change. While Ethiopian farmers have long demonstrated resilience, the frequency and severity of climate-related disasters have put their livelihoods-and the country’s food supply-at unprecedented risk.

Recognizing this vulnerability, the Ethiopian government has explored various support mechanisms, including emergency aid. Yet, agricultural insurance is emerging as a more proactive and sustainable solution, enabling farmers to receive instant cash payments when adverse weather strikes. This financial safety net not only helps them recover more quickly but also empowers them to reinvest in their farms and communities.

Lessons from the Past

Previous attempts to introduce agricultural insurance in Ethiopia have faced significant hurdles. Pilot projects often struggled with scalability and sustainability, hampered by high distribution costs, unaffordable premiums, and a heavy reliance on external donor funding. A comprehensive study by the Agricultural Transformation Institute (ATI) underscored these challenges, calling for integrated approaches and affordable insurance models.

Awet Tekle, Director of Rural Financial Services at ATI, explained, “We have learned from important data obtained in the past for climate-induced agricultural disasters that the country desperately needs insurance, but it is not included in the rural development policy itself. Recognizing this gap, the government included agricultural finance and insurance as one pillar in the newly adopted Agriculture and Rural Development Policy. The greatest lesson is the progress being made in creating the necessary framework.”

A Breakthrough Model

Pula Advisors has tackled these historical barriers head-on with a unique approach. By integrating insurance premiums into Ethiopia’s widely used Input Voucher System (IVS)-which reaches over 7.5 million farmers annually-Pula has dramatically reduced distribution costs and improved accessibility. This innovative bundling of insurance with fertilizer purchases has lowered premium prices and increased scalability, making insurance increasingly attractive and attainable for smallholder farmers.

Dagmawi Haileyesus, Pula’s Ethiopia Country Director, recounted, “In 2014 EC, it was planned to introduce agricultural insurance to Ethiopian farmers in collaboration with ATI and the Ministry of Agriculture. ATI conducted research and obtained more than 15 experimental experiences in Ethiopia. This study identified the weaknesses and strengths of these pilot programs. Five main factors have been identified that have guided this work: non-voluntary participation, high premium prices, limited coverage, high dependence on donors, and a focus solely on drought.”

Since its inception, Pula’s program has made remarkable strides. “When Pula started its operations, it enrolled 122,000 farmers in the first phase of the program,” Dagmawi noted. “With partners such as ATI, Oromia Insurance Company, WFP and KfW, we were able to lower the premium rate, which was up to 19% in the country, to 6.5% in the first season. After that, PULA introduced comprehensive coverage. After working on this for one year, PULA paid compensation of 39 million birr-the largest crop insurance payment in Ethiopia. By the end of 2016, Pula had reached over 500,000 farmers nationwide and facilitated claim payments of over 210 million birr.” Today, the program is on track to reach 3 million farmers in Amhara and 1 million in Tigray.

Regional Success and Farmer Empowerment

Mushira Sisay, Director of Inputs and Rural Finance at the Amhara Regional Agriculture Bureau, expressed strong support for the initiative: “Farmers in our area have faced significant challenges related to climate for a long time. Agricultural insurance should be something that allows farmers to grow freely while adapting to climate change. When such incidents occur, they can respond to the damage caused and receive compensation, which allows us to move forward better. We need to create broad awareness so that all farmers can be included in this insurance coverage.”

The partnership between Pula and the Amhara Regional Agriculture Bureau has been pivotal. Sisay noted, “Over the past few years, the partnership has been successful in expanding insurance coverage and demonstrating its benefits to our local farmers. The work of the Regional Agriculture Bureau as a model for other regions is admirable, demonstrating the impact of this collaboration. Overall, our cooperation can be described as excellent.”

Similar efforts are underway in Tigray, where Yemane G/Miskel, Deputy Head of the Tigray Regional Cooperative Promotion and Marketing Agency, emphasized the importance of insurance and the need for ongoing training and coordination to maximize benefits for farmers.

Looking Ahead: National Expansion

With an eye toward 2025, Pula is preparing to expand its reach into the Oromia region. Yosepha Soboka, Managing Director of KMD, Pula’s partner in Oromia, stated, “We are working in partnership with Pula. We are currently in discussions with the relevant authorities and are confident that we will be able to start work soon.”

To ensure the success of its Agricultural Yield Index Insurance (AYII), Pula has launched extensive awareness and training programs. More than 1,000 local youth have been trained as field coordinators and agents, while radio campaigns, street fairs, and agricultural extension workers are being used to educate farmers about the benefits of insurance.

Building Resilience for the Future

This multi-pronged approach is designed to build trust, raise awareness, and ensure the long-term resilience and financial security of Ethiopian smallholder farmers. The success of this large-scale agricultural insurance initiative holds tremendous promise for transforming the lives of Ethiopian farmers, strengthening national food security, and enhancing the country’s capacity to withstand the mounting challenges of climate change.

By learning from past experiences and forging strong public-private partnerships, Ethiopia is laying the groundwork for a more secure and prosperous future for its agricultural communities. As these insurance programs continue to expand and evolve, they offer hope and stability to millions of farmers-ensuring that the nation’s agricultural backbone remains strong for generations to come.