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Enhancing livelihoods and reducing the vulnerability of pastoral populations -- ILRI

 
Country of Operation: Kenya
Region: Africa
Sub Topics: Other channels, Sales, Consumer education, Impact, Improving value, Agriculture
 

Organizational Overview

The International Livestock Research Institute (ILRI) works at the crossroads of livestock and poverty, bringing high-quality science and capacity-building to bear on poverty reduction and sustainable development for poor livestock keepers and their communities. ILRI's research portfolio comprises three issue-oriented themes: 1) improving market opportunities; 2) using biotechnology to secure livestock assets; and 3) people, livestock and the environment. The institute also researches two cross-cutting programs that study evolution in livestock systems and the impacts of livestock innovation on poverty, vulnerability and gender equity. ILRI works in all tropical developing regions with special emphasis on Africa and South and Southeast Asia.

 

Project Description

The International Livestock Research Institute (ILRI) works at the crossroads of livestock and poverty, bringing high-quality science and capacity-building to bear on poverty reduction and sustainable development for poor livestock keepers and their communities. ILRI's research portfolio comprises three issue-oriented themes: 1) improving market opportunities; 2) using biotechnology to secure livestock assets; and 3) people, livestock and the environment. The institute also researches two cross-cutting programs that study evolution in livestock systems and the impacts of livestock innovation on poverty, vulnerability and gender equity. ILRI works in all tropical developing regions with special emphasis on Africa and South and Southeast Asia.

 

Activities Overview

Index-based livestock insurance is designed to cater for pastoral communities in the arid and semi-arid lands (ASALs) of Northern Kenya. Currently the project is being implemented in Marsabit Northern Kenya. The target clients are individual pastoralists; both large and small scale. Since the pastoral livestock depend on the pastures as the only source of food, an index -based livestock insurance that monitors the forage availability through satellites and relates this to livestock deaths was picked as the best option.

Livestock insurance is critical in drought-prone countries like Kenya. In 2011, Kenya suffered one of the worst droughts in its history which killed up to 30% of the country's livestock in some of the divisions in Northern Kenya. The Government of Kenya (2000) indicate that 60% of Kenya’s livestock are found in the pastoralist land, valued at approximately $6 billion, with an annual milk value of between $67 - $107 million.

In the last few years droughts have been increasingly severe in Kenya, with devastating results on the local population. During 2011 alone, livestock pastoralists lost on average a third of their animals due to severe drought. ILRI believed that it could make insurance affordable for Kenyan pastoralists, and in 2010 it began to pilot the Index Based Livestock Insurance (IBLI), a product which insures farmers against losing their cattle due to drought.

The key to its success is a new way to measure livestock losses – satellite technology. Traditionally livestock insurance provides pastoralists with a payment once it has verified the death of each animal. Verifying animal deaths is an expensive and difficult process for small-scale farmers in rural Kenya. Therefore, rather than responding to the deaths of individual animals, ILRI chose to make payments on the basis of an index linking the deterioration of grassland and livestock mortality. When grassland deteriorates to a certain level, cattle generally begin to die. The state of the grassland is therefore a good indicator of cattle deaths. Satellite imagery is used to measure the state of the grassland, and farmers are paid depending on this index, regardless of how many of their animals actually die.

With evidence of the product’s positive impact on pastoralists, ILRI is now working with new partners to extend the product into other regions of Kenya and into Ethiopia. Constant work is also being done to improve the quality of the contract and to raise awareness among farmers.  

 

Learning Agenda

The following questions were asked as part of the learning agenda of ILRI:

  • Does insurance change households' economic decisions and welfare? If so, by how much?
  • What are the determinants of insurance uptake?
  • What are the opportunities for delivering insurance marketing and extension services?
  • How effective are different marketing and extension tools in enabling pastoralists to make insurance investment decisions?
  • How to design better and simpler IBLI contracts?
  • What are the various remote sensing tools that can help in better design of index products?
  • How effective are different mechanisms for education/extension/marketing in influencing pastoralists demand?
  • How to differentiate and incentivise roles for consumer education and actual sales?
  • What are the factors that can result in effective partnerships between commercial players and research institutes?
  • What roles can be segregated between commercial players to ensure better execution of insurance projects?

Latest Updates

As of June 2017

IBLI contract was revised in Kenya in August 2013 and products were developed for 11 Northern Kenya Divisions. Contract provision was extended to Isiolo and Wajir, with APA as the underwriter in Isiolo, with support from World Vision and CARE, and Takaful Insurance of Africa as the underwriter in Wajir, with support from Mercy Corps. In March 2014, a payout was trigger in Wajir and in some places of Isiolo.

IBLI also extended coverage to South Ethiopia and launched a product in Borana Zone in partnership with OIC Insurance.

Product uptake has continued to be a challenge with numbers varying between 200 to 500 farmers in each sales cycle for all the areas where IBLI is being sold.

ILRI also worked together with the World Bank’s Agricultural Insurance Development program to support Government of Kenya’s effort to rollout the Kenya Livestock Insurance Program (KLIP) for Kenya’s pastoralists. KLIP was launched in 2015. The Government of Kenya provided premium for 5 "Tropical Livestock Units" (TLUs) of the pastoralists and the insurance cover is provided by a consortium of seven insurance companies. ILRI provides the technical inputs for product design and mechanisms for consumer education. This includes raising the awareness of the insurance programme among potential clients, improving the knowledge skills and job aids for sales promoters and agents and developing knowledge and tools for the government and insurance industry policymakers. KLIP currently covers 14,000 pastoralists with an estimated 70,000 TLUs.

Lessons

Insurance can help improving households’ expected behaviours and outcomes. When compared with uninsured households, households with IBLI coverage report:

  • 36% reduction in the likelihood of distress livestock sales, especially among modestly better-off households (64%);
  • 25% reduction in the likelihood of reducing meals as a coping strategy, especially among those with small or no herds (43%).

IBLI appears to provide a flexible safety net, reducing reliance on the most adverse behaviours undertaken by different groups.

Simpler products are easier to develop and introduce. As IBLI expanded to other areas of Kenya, ILRI realised that livestock mortality data was not easily available and that predicted mortality contracts were not giving good results. As an alternative, ILRI has decided to move in the direction of forage scarcity contracts, similar to what is being implemented in Borana, south Ethiopia. In this case, contracts are designed based only on transformations of NDVI (Normalized Difference Vegetation Index), which is easier to explain to the pastoralists than predicted mortality.

Public private partnerships are important for scale. International experience shows that agricultural insurance programs that have scaled up have strong public and private sector pillars, as part of overall agriculture risk management strategy.

Technology plays an important role in making operations efficient. ILRI’s pilot success has been supported by ICT-based cell phones with an offline mode used for sales, and partnerships with development NGOs in the area such as CARE, who assist us in consumer education on insurance.

Climactic condition of regions can impact logistics and operations. The arid and semi-arid lands (ASALs) of Northern Kenya are very difficult to work in logistically, and there is disruptive fighting in many districts. Distribution channels are insufficient. ILRI is working with local shopkeepers to act as the sales agents since financial institutions in the area do not have presence in the villages. The potential clients are mostly illiterate and have had little or no previous experience with formal insurance.

Parts of the content of this page were developed in collaboration with the Global Index Insurance Facility as part of the partnership between the World Bank Group and the ILO's Impact Insurance Facility, with the support of the Dutch Ministry of Foreign Affairs.

Contributor/s:  Global Index Insurance Facility, Andrew Mude, Brenda Wandera and Pranav Prashad
 
 
Date of last update:  17/07/2017