In an attempt to rescue its smallholder farmers who have been frequently exposed to crop failures and drought, Ethiopian government launched a national agriculture insurance that by covers 200,000 farmers this year.

"This new insurance will make possible sustainable income for smallholder farmers by managing risks related to weather variation," said Sintayehu Weldemichael, head of public financial enterprises agency at the launch in Addis Ababa.

Labelled Normalised Difference Vegetation Index (NDVI), the new scheme uses the same index as that used by national and international agencies to monitor the occurrence of drought.

"Ethiopian Insurance Corporation plans to venture into rural micro insurance products in order to provide safety nets for low income and sections of the population in Ethiopia," said Yewondwossen Eteffa, chief executive of EIC, the biggest insurance company in Ethiopia.

"The new insurance uses technology platforms and works with co-operatives and microfinance institutions near the farmers and serves as agents for the insurance corporation. The product is designed with due consideration of the literacy level of the farmers and made ready to be distributed in the most accessible manner," he added.

And if that crop fails due to weather, the farmer will get total investment on inputs from the EIC.

Studies show that currently an Ethiopian smallholder farmer spends 2,500 to 3,000 birr on average on inputs to grow crops in one season.

That means a farmer who spends 3,000 birr ($141) for inputs is expected to pay 10 per cent of this amount.

Source - allafrica.com