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Of cows, camels and ‘charity insurance’ on Kenya’s Somali frontier–The Economist

Takaful insurance policy holder in Wajir, northern Kenya

Bashir Ibrahim Mohamed, Takaful Insurance of Africa policy holder. Ibrahim is the father of Hassan Bashir, the CEO of TIA (photo credit: ILRI/Riccardo Gangale).

‘As well as a cheque for $700, a knowing look passed between Hassan Bashir and Bashir Mohamed, his 80-year-old father. A payment at a ceremony for herders in Wajir, a town near Kenya’s border with Somalia, settled an argument dating back to 1997, when the son moved into the insurance business.

Mr Bashir, born into a cattle-herding Somali family in the rugged north-east of Kenya, was told that his career choice was not only odd but un-Islamic. Many imams say that sharia law does not sanction conventional insurance, deeming it to contain elements of gambling.

‘Despite being proud of his earning power, Mr Bashir found his father would not touch the money. He would not even accept the cash to go on the haj, the pilgrimage to Mecca. “He did not know anything about insurance,” said the son. “He just knew it was wrong.”

‘His family’s disapproval persuaded Mr Bashir to set up Takaful, Kenya’s first sharia-compliant insurance company. It offers mutual or “charity insurance”, whereby the insurer acts as an agent, charging a set fee rather than un-Islamic interest. But Mr Bashir would not stop at insuring his community’s cars, homes and businesses; he wanted to solve their biggest problem, the loss of livestock to drought.

Camels herded to water in Wajir, northern Kenya

Camels at a water point near Wajir, northern Kenya (photo credit: ILRI/Riccardo Gangale).

‘That proved harder. Insuring animals who range with semi-nomadic herders across some of the harshest terrain on earth had defeated all previous efforts. Eventually he came across the work of a Kenyan economist, Andrew Mude of the International Livestock Research Institute (ILRI), based in Nairobi.

‘Mr Mude has developed an insurance model that uses satellite images to assess the impact of drought on the vegetation that camels, cows and goats need to survive. . . .

This model “insures the grass, not the animal”, says Mr Mude.. . .

‘Persuading seasoned Somali herders who have been husbanding their animals the same way for centuries to pay insurance premiums has not been easy. Mr Bashir has bent the ear of local imams and sheikhs and brought in Islamic scholars. Meanwhile donors, including Britain and Australia, whose aid agencies fund ILRI, have stumped up more money to get the word out around Wajir. . . .’

Jimmy Smith (left) and DFID's Lisa Phillips, at the Wajir insurance payouts

Jimmy Smith, director general of the International Livestock Research Institute (ILRI) and Lisa Phillips, of the UK’s Department for International Development (DFID) at a ceremony for payment vouchers to eligible participants, Takaful Insurance of Africa policy holders at the Red Cross Hall, in Wajir, northern Kenya, in Mar 2014 (photo credit: ILRI/Riccardo Gangale).

ILRI works in collaboration with a wide array of partners in this program that include the government of the Republic of Kenya, Cornell University and the Index Insurance Innovation Initiative (I4), among many others.

ILRI and partners want to see livestock insurance available throughout East Africa, where an estimated 70 million people live in drylands, many of them making their living by herding animals. In Kenya alone, the pastoral livestock sector is estimated to be worth at least USD5 billion. The eight-nation Intergovernmental Authority on Development (IGAD) estimates that over 90 percent of the meat consumed in East Africa comes from pastoral herds.

So far, about 4,000 pastoralists in northern Kenya, not all of them Muslim, have bought IBLI contracts since the project launched in 2010, an indication that there is both interest in and demand for livestock insurance.

Watch a 4-minute film by The Economist on the insurance payout in Wajir: The Economist video on livestock insurance payouts in Wajir, Kenya

Read the whole article in The Economist: A new kind of insurance may protect herders against drought, 19 Apr 2014 (print edition).

Read ILRI’s news release about this event: Africa’s first ‘Islamic-compliant’ livestock insurance pays 100 herders in Kenya’s remote drylands of Wajir for drought-related livestock losses, 25 Mar 2014.

See other photos of this event.

Read other news clippings about this event:
Shelter from the storm (literally): As remote herders get drought-related insurance payments, the heaven’s open, 5 Apr 2014
Africa’s first Islamic insurance for herders, 2 Apr 2014
Takaful, ILRI payout ‘sharia-compliant’ insurance to drought-suffering livestock herders in Wajir, 28 Mar 2014

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