At present, countries in the Horn of Africa are in the midst of a multi-season drought. There have also been years when the rains have come with such force that floods have washed away the season’s work, sometimes with homes, as happened in Mozambique just two years ago.
Climate change is making these disasters more frequent. It is difficult for rural families whose livelihoods depend on the food they can grow. A 2015 World Bank study estimated that climate change over the next 20 years would increase the number of desperately poor people by 122 million, if nothing was done about it.
While the drivers of deep poverty in rural Africa are many and complex, climatic shocks are one of the most important.
Research I have conducted with colleagues in the past has shown how climate shocks affect rural households in Ethiopia and Honduras. We have found that acute shocks – a devastating hurricane or a prolonged drought – can plunge households into chronic poverty and hardship.
Climate shocks can not only push families into poverty, but also keep them there. The feared anticipation of shocks, or risks, discourages investments that might otherwise raise families’ living standards and reduce their vulnerability to poverty. From the Sahel to Central America, smallholder farming households keep their modest savings in the form of food stocks. Although understandable, even optimal given the constraints they face, this behavior closes the vicious circle of shocks, risks and poverty.
But there may be a way to reset this relationship between risk, shocks and poverty. An emerging body of evidence reveals that new risk management tools that make households more resilient to shocks enable them to invest more in available technologies and economic opportunities.
My recent work in Mozambique and Tanzania, with colleagues (more on this later), adds to this evidence, showing what farmers can achieve by combining these tools.
Tools and their limits
One such risk management tool is agricultural index insurance. It provides payments for crop failures, so that a household does not lose everything in a bad year. Index insurance experiments have shown that when protected, farmers increase their investments in their farms by up to 30% and reap corresponding increases in income.
I participated in what was one of the most successful index insurance interventions to date. In a 2010 collaboration, researchers from the International Livestock Research Institute, the University of Wisconsin, and Cornell University started a program like this for pastoralist households. in northern Kenya. In 2015, it was adopted by the Government of Kenya and has provided over US$10 million to vulnerable pastoralists in the first five years.
Emerging evidence also shows that genetically-encoded risk management technologies can provide some of the same benefits as financial instruments. They include stress-tolerant crop varieties.
Both types of resilience-building technologies – financial and agronomic – have shown great promise but also have limitations. Insurance can be an expensive way to manage risk. This also incurs costs every year, whether the insurance pays or not.
An improved seed variety does not have such ongoing costs. Beyond the substantial initial cost of developing the new variety, the seeds can be bred and purchased for little more than any other seed variety. But seeds only protect farmers against a specific peril (limited flooding or specific type of drought). Beyond that, they offer little or no protection.
These observations suggested to us that bringing together different risk management technologies could be the way to free African smallholder farmers from the vicious cycle of shocks, risks and poverty.
In Mozambique and Tanzania, my colleagues and I conducted a four-year randomized controlled trial that combined index insurance and stress-tolerant maize to harness the synergies of the two together. Insurance has expanded the protection offered by seeds. Seed tolerance to certain droughts has reduced the cost of insurance. It would also provide higher yields than other varieties, even in normal years.
We designed the package so that in the event of a severe drought, the seeds are replaced and farmers can sow again the following season with the same stress-resistant seeds.
The project had a surprising result: the farmers who suffered the greatest losses from the drought obtained a larger harvest than before the following year.
When we analyzed the data, we found that insured farmers were not only able to feed their families after a drought, but they also increased the amount of improved maize seed they purchased. In fact, they have invested in more improved seeds than ever before. These additional purchases led to increased yields the following year as farmers became confident that the technologies worked, allowing them to deepen their investment and increase their incomes.
A new ending to the same old story
These field trials and many others prove that effective risk management tools can create a new end to the same old story about shocks, risks and poverty. These tools not only protect current well-being and promote resilience, but can also provide a solid foundation for future improvements. Together, resilience to shocks and the resulting investments in producing more food build what we call Resilience+.
Accelerating climate change has made it particularly urgent to create flexible bundles that improve resilience.
If the tools are effective and provide value, farmers will use them to increase their flexibility to choose improved inputs, to expand or diversify their plantings, or to try new and unfamiliar practices that can produce more food. We believe this approach could have a transformative impact where risk is primarily what prevents families from having stronger livelihoods.