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Can Insurance Help Low-Income Ethiopians Cope With Risk?

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Photo: Binyam Teshome / World Bank

The loss of crop or livestock as well as concerns about illness and accidents are key financial expenses on the minds of low-income Ethiopians.

Unexpected expenses associated with these issues are relatively common. A third of low-income Ethiopian households experienced at least one major health issue in the previous year, often paying for it out-of-pocket.

In rural areas, almost 50% of households experienced some agricultural loss in the previous year. For three-quarters of these households, these financial losses accounted for more than half of their income in a typical year.

Yet even though these crises affect a large number of the population, Ethiopians don’t have adequate mechanisms in place to cope with the financial hardship they bring.

“People don’t put money aside to deal with risk. Instead, they rely on cash and savings, if they have them, borrow money from family, if possible, or as a last resort, sell livestock to cope with these unexpected shocks,” said Craig Thorburn, a Lead Financial Sector Specialist with the Finance, Competitiveness and Innovation Global Practice of the World Bank Group, and the technical lead for a FIRST Initiative funded project that produced the new report What People Want: Investigating Inclusive Insurance Demand in Ethiopia.

Informally borrowing money is a common coping strategy as loans from formal financial institutions are expensive and hard to get. However, when a crisis, such as drought, affects an entire community, informally borrowing money from relatives isn’t a viable option. And selling livestock may inject rural households with quick access to cash, but this approach ultimately leaves families poorer and less resilient.

Last year, the World Bank Group conducted a demand-research study in Ethiopia to examine risks low-income households face and see whether insurance could be a tool that Ethiopians could tap into to reduce and better manage these financial burdens.

This country-wide survey reached close to 3000 households, totaling 13,000 people, from both rural and urban areas.

“Understanding the needs of underserved populations, including low-income households, is key to developing quality insurance products and expanding insurance markets,” Thorburn said. “Without this knowledge, potential insurers wouldn’t understand the real and perceived risk of this unserved market segment.”

The survey found that people had little knowledge or experience with insurance, and that 50% of surveyed households never heard of insurance. However, people expressed interest in it if insurance products were devised as accessible and inexpensive.

Ethiopians have unserved needs that could be met with affordable products they actually want.

For example, 97% of focus group participants indicated they would buy a proposed prototype crop insurance product if it were available to them, as it would allow them to replace lost income and buy inputs for the next crop cycle.

And for health-related issues, the survey found that while many people fear a high-cost illness, they could manage many basic expenses with their existing resources, with 75% reporting that they were able to fully recover from financial hardship. This indicated that a well-designed insurance product could leverage existing strategies such as savings, and provide peace of mind. Interest in a hospital cash prototype was high, with close to half of participants willing to pay an actuarially sound premium.

This openness to insurance could provide a great opportunity for insurers, particularly if they can customize and tailor their products to suit customers’ needs.

While this initial research indicates that low-income households are interested in insurance, it would require insurers, the government and other stakeholders to work together to develop insurance products that are accessible, affordable and appropriately designed for people’s needs. Other aspects related to extending the insurance market would need to be considered as well. These include adapting the regulatory framework to motivate insurers to enter this market and devise financial education programs to educate people on insurance.

“Ethiopia provides a significant opportunity for insurers to expand their businesses, the government to improve the overall stability of the low-income population, and low-income people to stabilize their economic status,” said Thorburn.

Focus group participants indicated they would be most likely to purchase insurance from formal financial institutions, such as banks or microfinance institutions, which would bring stability and financial capacity. They indicated that they would be less likely to purchase insurance through informal formal groups, such as savings and credit cooperatives or Edirs, which are well-ingrained local community-based organizations created to help cover funeral expenses.

The World Bank is working in Ethiopia to create an enabling environment for inclusive insurance.

These survey findings are part of a broader World Bank study that that looked at supporting more inclusive insurance markets in Ethiopia.

This study and the report were done jointly with MicroInsurance Centre at Milliman and EA Consultants. The study and the report were funded by the FIRST Initiative.

World Bank

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Africa

Shaping the Future Relations between Russia and Guinea-Bissau

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Russian Foreign Minister Sergey Lavrov and Guinea- Bissau Suzi Carla Barbosa have signed a memorandum on political consultations. This aims at strengthening political dialogue and promoting consistency in good cooperation at the international arena.

Russia expects trade and economic ties with Guinea-Bissau will continue developing; they must correspond to the high level of the political dialog between the countries, Russian Foreign Minister Sergey Lavrov said in his opening remarks at the meeting with his counterpart from Guinea-Bissau Suzi Carla Barbosa.

“Probably, the next natural step will be to build up our trade-economic, investment cooperation in order to bring it to the level of our sound, confident political dialogue,” the Russian Minister added.

Speculation aside, the face-to-face diplomatic talks focus on effective ways for developing tangible cooperation in most diverse areas in Guinea-Bissau. The meeting agreed to take a number of practical steps, including reciprocal visits by entrepreneurs both ways.

“We talked about more efficient ways of developing our trade and economic cooperation. We agreed to undertake a range of specific steps, including the trips of businessmen from Guinea-Bissau to Russia and then from Russia to Guinea-Bissau,” Lavrov said.

Last year, Prime Minister of Guinea-Bissau Nuno Gomes Nabiam met with representatives of the Russian business community. The areas of interest mentioned in this respect included exploration of natural resources, construction of infrastructure facilities, as well as development of agriculture and fisheries.

Guineans are keen on deepening bilateral cooperation in fishing. The five Russian fishing trawlers have recently resumed their operations in the exclusive economic zone of Guinea-Bissau.

As explained the media conference, the topics discussed for cooperation included such spheres as natural resources tapping, infrastructure development, agriculture and fisheries

In terms of education, over 5,000 people have already entered civilian professions, and more than 3,000 people have acquired military specialties, which is important for Guinea-Bissau. In addition, military and technical intergovernmental cooperation agreement is about to enter in force. According to reports, Russia would continue to pursue military cooperation with the country.

Both ministers reviewed the situation in Mali, the Republic of Guinea and some other African areas, with an emphasis on West Africa and the Sahara-Sahel region.

Lavrov and Carla Barbosa discussed preparations for the second Russia-Africa summit planned for 2022. With high hopes that the collective attendance will include President of Guinea-Bissau Umaro Sissoco Embalo.

Guinea-Bissau, like many African states, has had political problems. In April 2020, the regional group of fifteen West African countries often referred to as ECOWAS, after months of election dispute finally recognized the victory of Umaro Sissoco Embaló of Guinea-Bissau.

Perspectives for future development are immense in the country. The marine resources and other waterbodies are integral part to the livelihood. Steps to increase agricultural production are necessary. The economy largely depends on agriculture: fish, cashew nuts and peanuts are its major exports. Its population estimated at 1.9 million, and more than two-thirds lives below the poverty line.

Sharing borders with Guinea (to the southeast), Gambia and Senegal (to the north), Guinea-Bissau attained its independence in September 1973. Guinea-Bissau follows a nonaligned foreign policy and seeks friendly and cooperative relations with a wide variety of states and organizations. Besides, Eсonomic Community of West African States (ECOWAS), Guinea-Bissau is a member of the African Union (AU) and the United Nations.

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Analyzing The American Hybrid War on Ethiopia

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photo: UNFPA/Sufian Abdul-Mouty

Ethiopia has come under unprecedented pressure from the U.S. ever since it commenced a military operation in its northern Tigray Region last November. Prime Minister Abiy Ahmed ordered the armed forces to respond to the Tigray People’s Liberation Front (TPLF), which used to be the most powerful faction of the former ruling party, after it attacked a military barracks. Addis Ababa now officially considers the TPLF to be a terrorist group. It fell out with PM Abiy after initially facilitating his rise to power as a result of disagreements over his fast-moving socio-political reforms.

The TPLF refused to join PM Abiy’s Prosperity Party upon its formation in December 2019. It also regarded his decision to postpone national elections last August until this June due to the COVID-19 pandemic as resulting in him illegitimately remaining in power. In response, the TPLF organized its own elections in the Tigray Region in September 2020 that were not recognized by the central government. This set a tense backdrop against which the group attacked the military a few months later in early November, which was what triggered the ongoing conflict.

The U.S. and its allies claim that Ethiopia is carrying out a campaign of ethnic cleansing in Tigray, which Addis Ababa, of course, denies. This set the basis upon which the U.S. began to sanction the country. The first sanctions were imposed in late May to target Ethiopian officials as well as some of their Eritrean allies who, the U.S. claimed, were supporting them in their military campaign. The Ethiopian National Defense Force (ENDF) pulled out of Tigray a month later in June, claiming that this unilateral move would facilitate the international community’s relief efforts in the war-torn region that had attracted so much global attention.

The conflict did not end, however, but actually expanded. The TPLF felt emboldened to invade the neighboring regions of Afar and Amhara, parts of which it continues to occupy. Addis Ababa suspected that the group was receiving various equipment and other forms of support under the cover of UN aid shipments. It also accused the TPLF of manipulating international perceptions about the region’s humanitarian crisis in order to generate more support and increase pressure on the Ethiopian government. PM Abiy published an open letter to U.S. President Joe Biden last month, urging him to reconsider his country’s policy towards the conflict.

It regrettably went unheeded but deserves to be read in full, since the Ethiopian leader compellingly argued that the American policy is counterproductive and influenced by the TPLF’s lobbyists. Shortly after that, his government expelled seven UN officials at the end of September, who it accused of meddling. In early October, CNN published a report claiming that Ethiopian Airlines was illegally transporting weapons to and from Eritrea during the early stages of the conflict. This, in turn, prompted more sanctions threats from the U.S. The situation is such that the U.S. is now actively working in support of the TPLF against PM Abiy’s government.

This American hybrid war on Ethiopia is waged in various ways that deserve further study. They closely resemble the American hybrid war on Syria in the sense that the U.S. is using humanitarian pretexts to justify meddling in the country’s internal affairs. Its motivations to backstab its regional ally are entirely self-interested and zero-sum. The U.S. is uncomfortable with PM Abiy’s geopolitical balancing between Washington and Beijing. Although the former TPLF-led government was also close to China, the U.S. likely expected PM Abiy to distance Ethiopia from it, considering the pressure that Washington exerts upon its partners to do so.

He came to power in early 2018 around the time when the U.S. began to intensify its ongoing New Cold War with China. From the American perspective, it is unacceptable for the country’s partners to retain close ties with its top geopolitical rival. It is for this reason why the US far from appreciates PM Abiy’s balancing act since it likely expected for him to move away from China. This leads to the next motivation for the American Hybrid War on Ethiopia, which is to return the TPLF to power there, if not in a national capacity, then at least in its home region. Such an explanation will now be elaborated on more at length.

Ethiopia finds itself at a crossroads whereby the country can either continue on the path of centralization, like PM Abiy has attempted to do, or pursue the course of further federalization to the point where its regions receive more autonomy than before. One of the TPLF’s primary criticisms of the Ethiopian leader is that he is allegedly going against the country’s post-civil war federal foundation. If it can succeed at least in securing broad autonomy for its home region by force after failing to do so peacefully, this might then trigger radical reforms that result in advancing its federal vision throughout the rest of the country.

The U.S. could exploit the broad autonomy that these regions might receive in order to individually pressure them to distance themselves from China. Ethiopia is, after all, Africa’s second most populous country and used to have one of the world’s fastest rates of economic growth before the COVID-19 pandemic. From a continental standpoint, the U.S. might believe that turning Ethiopia against China could eventually become a game-changer in the New Cold War’s African theater. In other words, everything that the U.S. is doing against Ethiopia is motivated by its desire to “contain” China. It is now time to explain its modus operandi in detail.

The U.S. immediately exploited the TPLF-provoked conflict in Ethiopia to pressure PM Abiy to treat the group as his political equals. This was unacceptable for him, since doing so would legitimize all other groups that attack the armed forces in pursuit of their political objectives. The Ethiopian leader rightly feared that it could also trigger a domino effect that results in the country’s “Balkanization”, which would advance American interests in the sense of taking the country out of the “geopolitical game” with China. In response to his recalcitrance, the U.S. alleged that his government was carrying out ethnic cleansing.

American officials knew that this would attract global attention that they could manipulate to put multilateral pressure upon his government. Even so, PM Abiy still did not relent but continued waging his war in the interests of national unity. With time, the U.S. began to portray him as a “rogue leader” who did not deserve his Nobel Peace Prize in 2019 for resolving his country’s frozen conflict with the neighboring Eritrea. Its perception managers presented him as a power-hungry dictator, who was ruthlessly killing the ethnic minorities that opposed his government, including by deliberately starving them to death.

The ENDF’s withdrawal from the Tigray Region over the summer was interpreted by the U.S. as having been commenced from a position of weakness. It believed that ramping up the pressure at this sensitive point in the conflict could lead to him politically capitulating to the TPLF’s demands. This was a wrong assessment since PM Abiy hoped that everything would stabilize after his decision facilitated international relief efforts to the war-torn region. These were unfortunately exploited, according to Addis Ababa, in order to provide more support for the TPLF, which is why his government recently expelled those seven UN officials.

The U.S. “humanitarian imperialism”, as one can now call its policy against Ethiopia, is very pernicious. It focuses solely on the humanitarian crisis in the Tigray Region while ignoring the ones that the TPLF caused in the neighboring Afar and Amhara regions. This policy also manipulates perceptions about the situation in Tigray in order to delegitimize PM Abiy, the ENDF and the political cause of national unity that they are fighting for. The purpose is to encourage more members of the international community to pressure Ethiopia to the point where it finally feels compelled to politically capitulate. This policy, however, has proven to be counterproductive.

Far from giving up the fight, Ethiopia is doubling down and is now more motivated than ever before to see the war to its end, though ideally through a political rather than military solution due to humanitarian considerations. This does not imply treating the terrorist-designated TPLF as an equal but envisions replacing its leadership in the Tigray Region with a pro-government/unity party instead. That is, of course, easier said than done, which is why military means might continue to be relied upon to this political end. Throughout the course of its struggle, Ethiopia has begun to be seen as an anti-imperialist icon across Africa and the rest of the Global South.

PM Abiy’s open letter to Biden was full of powerful statements articulating Ethiopia’s sovereign interests. It showed that African leaders can resist the U.S., which could inspire the Ethiopian leader’s counterparts who might also come under similar pressure from their partner sometime in the future—due to its zero-sum New Cold War geopolitical calculations. Ethiopia’s sheer size makes it an African leader, not to mention it hosting the headquarters of the African Union, so it can influence the rest of the continent. It also has a very proud anti-imperialist history which motivates its people not to submit to foreign pressure.

China, Russia and India have politically supported Ethiopia against the U.S. at the UN, thereby debunking The Economist’s lie last week that “Ethiopia is losing friends and influence”. To the contrary, Ethiopia is gaining friends and influence, especially among the rising powers and the rest of the Global South. Its principled resistance to the American hybrid war on it has shown others that there is an alternative to capitulation. It is indeed possible to fight back in the interests of national unity. Not all American destabilization plots are guaranteed success. Just like the U.S. failed to topple the Syrian government, so too has it failed to topple the Ethiopian regime.

Ethiopia, however, is many orders of magnitude larger than Syria. This makes its hitherto successful resistance to the American hybrid war all the more significant. The leader in the Horn of Africa is a very diverse country, whose many people could be pitted against one another through information warfare to provoke another round of civil war that would help the TPLF’s U.S.-backed anti-government crusade. That worst-case scenario has not materialized, though, due to the majority of the population’s commitment to national unity even among some of those who might have misgivings about the present government.

This year’s elections saw the Prosperity Party win by a landslide, which shows how much genuine support it and its founder have among the masses. Furthermore, PM Abiy’s concept of “medemer” (“coming together”) aims to counteract “Balkanization” processes by pragmatically reforming socio-political relations inside the country. It is a very promising idea that could inspire other very diverse states across the Global South and help them ideologically thwart divide-and-rule plots like the one presently waged against Ethiopia.

Assessing the strategic situation as it presently stands, the American Hybrid War on Ethiopia is expected to intensify on manipulated humanitarian pretexts. More sanctions and even the threatened revocation of Ethiopia’s access to the U.S. market through the African Growth and Opportunity Act (AGOA) could worsen the economic situation for millions of people. The purpose in doing so would be to provoke anti-government protests that the U.S. hopes would be violent enough to catalyze a self-sustaining cycle of destabilization throughout the country after the security services crack down on the rioters.

The supplementary purpose is to encourage some Ethiopians to join anti-government terrorist groups allied or working in coordination with the TPLF unless the U.S. succeeds in pulling off a Color Revolution. This modus operandi is identical to the one that it relied upon in its hybrid war on Syria. In the Ethiopian context, the U.S. hopes to forcefully “Balkanize” the country, whether de jure or de facto through an extreme form of federalization. The point is to punish Ethiopia for balancing between China and the U.S., which showed other Global South states that such a pragmatic approach is possible instead of the U.S.-practised zero-sum one.

Nevertheless, the U.S. might still fail. The ENDF and other security services retain control throughout all the country’s regions with the exception of Tigray. It is therefore unlikely that any Color Revolution or Unconventional War there will succeed. Furthermore, Ethiopia enjoys close ties with the rising multipolar powers like China, Russia and India who can help it weather the current crisis by neutralizing U.S. attempts to isolate the country. In addition, the “medemer” concept ensures that national unity remains at the core of the Ethiopian society, reducing the appeal of foreign-backed “Balkanization” narratives.

Altogether, it can be said that Ethiopia is successfully resisting the U.S. hybrid war against it. There have certainly been some serious costs to its international reputation, but it remains committed to the cause of national unity, and it does not seem likely to politically capitulate to the terrorist-designed TPLF’s foreign-backed demands. Expelling those seven UN officials for meddling was a major move which speaks to how serious the country is about protecting its sovereignty. The same can also be said about PM Abiy’s open letter to Biden which preceded that development and explained why the U.S. is wrong for meddling in Ethiopia.

The American Hybrid War on Ethiopia will likely continue since the US doesn’t like to lose. It keenly understands what’s at stake in the realm of international perceptions, and it’s that the US cannot afford to have an African country – let alone one as large and influential as Ethiopia is – successfully resist its pressure campaign. Ethiopia’s resolute resistance can inspire other countries across the Global South, which can complicate the US’ efforts to pressure them into curtailing ties with China in the New Cold War. Had the US simply accepted Ethiopia’s balancing act, then the conflict might have ended by now, but its zero-sum policies prevented that.

From our partner RIAC

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Reducing industrial pollution in the Niger River Basin

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The Niger River is the third-longest river in Africa, running for 4,180 km (2,600 miles) from its source in south-eastern Guinea, through Mali, Niger and Nigeria, before discharging via the Niger Delta into the Gulf of Guinea in the Atlantic Ocean. Tributaries that run through a further five countries feed into the mighty Niger.

Hundreds of millions of people in West Africa depend on the river and its tributaries, for drinking water, for fish to eat, for irrigation to grow crops, for use in productive processes, and for hydroelectric power.

The health of the Niger River Basin is vitally important for the people and for the environment of West Africa. But this health is endangered by land degradation, pollution, loss of biodiversity, invading aquatic vegetal species and climate change.

To both assess and address these environmental issues, a Global Environment Facility (GEF)-funded project has brought together international, regional and national entities to work on integrated water resources management for the benefit of communities and the resilience of ecosystems. (Project details can be found here.)

One part of the early project research found that as the Niger River passes through Tembakounda, Bamako, Gao, Niamey, Lokoja and Onithsa – major trading, agro-processing and industrial cities – wastewater and other polluting substances are discharged directly into the river, often without consideration for the environment. National governments of the countries which the river runs through are either unable to deal with the accumulated environmental problems and/or are ineffective at preventing, regulating, reducing and managing pollution from industrial activities.

For this reason, one component of the GEF project, implemented by the United Nations Industrial Development Organization (UNIDO), will facilitate the Transfer of Environmentally Sound Technology (TEST) to reduce wastewater discharges and pollution loads into the Niger River.

Despite the limitations on travel resulting from measures to halt the spread of the coronavirus, in August this year, UNIDO successfully identified and engaged with 19 pilot enterprises in various sectors, including pharmaceuticals, mining and agribusiness, operating in ‘pollution hotspots’ in the countries of the Niger River Basin. This number exceeds the original target of one enterprise per country. 

UNIDO experts are now introducing and sharing the Transfer of Environmentally Sound Technology (TEST) methodology with the pilot enterprises. In essence, this will mean the application of a set of tools including Resource Efficient and Cleaner Production, Environmental Management Systems, and Environmental Management Accounting, which will lead to the adoption of best practices, new skills and a new management culture.

Armed with these tools, the enterprises will be able to reduce product costs and increase productivity, while reducing the adverse environmental consequences of their operations. An awareness-raising campaign will be carried out so that the demonstration effect resonates across the Niger River Basin, prompting other enterprises to follow suit.

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