Livestock herders in northern Kenya and southern Ethiopia insured against drought for first time

Cattle herders at Goraye in Ethiopia’s lowland Oromiya region (photo on Flickr by Andrew Heavens).

‘The drylands of East Africa are home to millions of pastoralists, herders who move from place to place in search of water and pasture for their livestock. Drought years are tough for these families, who depend on their animals—cows, goats, sheep and camels—for both food and income. In a drought, pasture and water become much harder to find, and the livestock can weaken and die.

‘Now, climate change is making matters worse. Seasonal rains are becoming less predictable, and droughts more frequent and more severe. . . .

‘[W]ith climate change, pastoralists have less time to recover and rebuild their herds between dry spells. This leaves them vulnerable, and subsequent droughts can threaten their very survival. Moreover, when everyone in the community is suffering at the same time, it becomes harder for them to help each other through the crisis.

‘In 2008, USAID began supporting new programs to insure East African pastoralists against the loss of livestock in case of serious drought, thereby building the resilience of these vulnerable communities.

A new product — index-based livestock insurance (IBLI) — is being developed and tested in the Marsabit district of northern Kenya and the adjacent Borana region of southern Ethiopia. In these areas, pastoralists are raising over 18 million cows, goats and sheep. . . .

‘In most of East Africa . . . insurance and similar types of risk management tools are not available to vulnerable pastoralists or smallholder farmers. . .

Without insurance, herders’ families have little protection against the hunger and poverty that can come as a result of a significant drought,” says Andrew Mude, a researcher with the International Livestock Research Institute who has been working to develop risk management instruments for pastoralists in northern Kenya and southern Ethiopia. “Livestock that does not perish in the drought is often sold at rock-bottom prices, just so families can survive. Such distress sales may drop the herd sizes below a sustainable level from which it becomes difficult to recover, and the family becomes destitute.”

‘Many other households see their margin for coping with loss reduced, and they are left precariously vulnerable to the next dry spell. While humanitarian assistance is critical in stemming loss of human life in extreme shocks such as droughts, it has been less effective in preventing loss of livestock or other assets.

‘Enter NASA

‘The IBLI insurance program is one of several pilots USAID is supporting under the Assets and Market Access Collaborative Research Support Program (AMA CRSP). IBLI relies on NASA satellite data, which is free to the public, to show the health of local vegetation. Severe drops in greenness measured by the satellites indicate a drought is occurring. This drop in greenness closely correlates with higher livestock mortality as well. The satellite data is studied at agreed times during the year to determine whether the insurance will pay out to the pastoralists who purchased policies at the start of the season.

The IBLI product was developed by the International Livestock Research Institute in Nairobi, Kenya, in collaboration with AMA CRSP researchers from Cornell University and the University of California at Davis. IBLI contracts are issued by local insurance companies. Pastoralists decide how many camels, cattle, sheep or goats they want to insure, and the price varies from place to place depending on the risks. In Ethiopia, it costs about $6 to insure a goat, and $41 to insure a cow.

Index insurance products for weather risks are new, and few insurers in developing countries know how to design them.

‘“USAID and other donor support was critical for research, design and outreach necessary to get the IBLI product on the market,” says Mude. “Local insurance companies and other private-sector players are also critical for implementation and long-term sustainability. Local insurance companies offer the insurance product for sale, often in collaboration with microfinance institutions, input suppliers and mobile telephone companies that are doing business in rural areas.”. . .

‘The IBLI product was first sold in northern Kenya in 2010, and in southern Ethiopia in 2012. Insurance is a new concept to most of the pastoralist communities, and so effective outreach and education are key factors of the program’s success.

Pastoralists who heard about the livestock insurance were keen to understand it,” said Birhanu Taddesse, the Ethiopia project coordinator at the International Livestock Research Institute. “They were asking how commercial insurance works, and how it can help them in times of distress.”

‘This year, Ethiopian pastoralists in seven districts bought 270 policies. Kenyan pastoralists bought 216 policies, insuring 75 camels, 193 cows and 1,131 sheep and goats. . . .

‘Despite these successes, insurance alone is not enough. For pastoralists in East Africa, resilience to drought will also depend on improving traditional coping strategies, like storing water and seeking good pasture. Pastoralists will also need to use new risk-reduction measures, like better managing herds, improving animal health, enhancing grazing lands and accessing new piped water networks.

‘USAID is supporting a complimentary set of interventions aimed at keeping vulnerable populations in the Horn of Africa on their feet: strengthening livestock value chains and expanding them to include products like fodder, milk and leather so that pastoralist communities get higher and more predictable incomes from their animals. Those involved in the insurance projects say that the emergence of these pilot policies is just one piece of a larger puzzle of sustainability and resilience in the region—but a critical one.’

Read the whole article by Nora Fermat USAID Frontlines: East Africa’s dryland herders take out a policy for survival, January/February 2013.