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African droughts: Could insurance schemes help out?

Aid groups are appealing for proactive action, as Horn of Africa drought persists. Could insurance schemes for poor farmers and drought-prone nations provide the answer?

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Despite the tough farming terrain in Ethiopia's north, Desta Giday tripled the wheat yield on his 2.5-hectare plot last year. The technical difference came from fertilizer. But what fundamentally changed the wiry farmer's output was his decision to take a larger loan from a village cooperative – something he was willing to do because of insurance.

After paying off the $90 loan with grain proceeds of around $300 and with a $15 payout for partial drought from insurers, Mr. Desta and his wife were able to buy clothes for their six kids and stash away $17 in a savings institution. Although villagers were initially sceptical about investing in insurance policies that do not guarantee returns, "after the payout everybody is aware and wants to register," he says.

The insurance is part of a rethinking among donors and African governments on how best to deal with chronic drought in Africa. More than 13 million people in Somalia, Ethiopia, Djibouti, and Kenya still require assistance in a humanitarian crisis that "unfolded despite having been predicted," a report last month by Oxfam and Save the Children said. "Governments, donors, the UN and NGOs need to change their approach to chronic drought situations by managing the risks, not the crisis," they concluded.

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