“I am part of 7 Iddirs. My family and friends did not understand why. Then my husband died.”

Focus group member — January 2017 — Addis Ababa

An audible gasp was heard after this woman shared her experience. Then some whispering and understanding nods. Iddirs, voluntary membership organizations, have developed in Ethiopia to support members during the death and burial of family members. Iddirs provide community and emotional support at the time of death as well as financial assistance. Membership is well established throughout Ethiopia — in rural and urban populations as well as with rich, middle income, and poor populations. Iddir members typically meet once or twice a month to make a small contribution to a pool of funds. An Iddir pays out a benefit if a member or a covered family member dies.

While it is common to be a member of one or two Iddirs, membership in 7 is substantial. The contribution needed to be part of so many Iddirs, in terms of money and time, would be significant. So, why did she chose to join seven different Iddirs? Iddir memberships costs generally vary from 10 Birr to 50 Birr (about .50 USD to $2 USD) monthly and funeral payouts varied from 3,000 Birr to 6,000 Birr (about $133 to $266 USD). However, an average funeral in Ethiopia costs 24,000 Birr (about $1066 USD) — a potentially crippling sum. The payout from one or two iddirs was simply not sufficient, and this participant had gone to extreme lengths to secure the protection she needed.

It is clear that the informal solution of iddirs provides vital but insufficient support. Formal insurance products, on the other hand, can offer higher covers but lack the social dimension that makes iddirs so powerful. Could we combine the best of both worlds?

Insurance could play an important role in strengthening iddirs and allowing their members access to greater protection. A well-designed scheme could boost the benefit levels iddirs are able to offer or allow them to provide additional cover and benefit options to their members. In this way, iddirs could provide a more appealing benefit package, members would benefit from higher levels of protection, and insurers would have the opportunity to work with a powerful distribution channel.

As a fellow working in Ethiopia, I am helping Nyala Insurance look at how we can work with this important cultural and risk management system. It will require new kinds of thinking around distribution, payments, and partnerships, but we are ready for the challenge.

Olisa Gravney — ILO Impact Insurance Fellow — Addis Ababa, Ethiopia