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Satellite imagery protects cattle keepers from drought

Cows_SahelianRockArt

Domesticated cattle are depicted in this rock art made 8,000 to 5,000 years ago in the Sahel, when this part of the Sahara was still green and before it began to be hit by drought.

Using data from satellite imagery, insurers can assess the impact of drought on the vegetation that livestock need to survive. Could this be a lifeline for Kenyan farmers?

Article by ILRI’s Bryn Davies and Andrew Mude

‘The arid and semi-arid lands (ASAL) of Kenya are among the poorest and most vulnerable regions of the world. . . . More than three million pastoralist households are regularly hit by increasingly severe droughts, costing the economy an estimated $12.1bn between 2008 and 2011. For livelihoods that rely mainly on livestock, the high livestock mortality rate caused by drought has devastating effects, rendering these pastoralists among the most vulnerable populations in Kenya. As the impacts of climate change unfold, the link between drought risk, vulnerability and poverty becomes significantly stronger.

‘Over the past several years, the International Livestock Research Institute (ILRI), in collaboration with Cornell University and technical partners, has pursued a research program aimed at designing, developing and implementing insurance products to protect livestock keepers from drought-related asset losses. Using satellite imagery to assess the amount of forage available, Index-Based Livestock Insurance (IBLI) provides insured pastoralists with a pay-out in times of drought based on predicted rather than actual livestock deaths.

‘In order to launch IBLI as a commercial product, ILRI and Takaful Insurance of Africa came together in August 2013 to offer a sharia-compliant version of IBLI in Wajir County with plans of expansion into other areas of northern Kenya later this year. As a sharia compliant product, Takaful does not go against the teachings of Islam and is guided by the principles of improved welfare for all. For example, it offers mutual or “community insurance”, whereby the insurer charges a set fee, rather than applying interest, which in sharia-law can be seen as a form of gambling.

‘The CEO of Takaful Insurance of Africa, Hassan Bashir, was born into a cattle-herding Somali family, and as Kenya’s first sharia-compliant insurance company, he wanted to solve his community’s biggest problem – the loss of livestock due to drought.

‘Takaful requires that those who need protection participate in a risk pooling scheme. Fund participants are grouped into geographically defined areas that have a set contribution based on local pasture conditions and they receive an indemnity when predicted livestock mortality from drought rises above the trigger level.

. . . [T]he scheme has had its successes. In March 2014, all 101 policyholders received a payout for a low level of drought in the area and sales between August/September 2013 and January/February 2014 grew by 138% with the expense ratio to Takaful Insurance decreasing by 100%. . . .

So far, the Index-Based Livestock Insurance program has been linked to a 50% drop in ‘distress’ sales of livestock to raise cash in times of drought, a 33% reduced likelihood of having to eat significantly smaller meals and a 33% reduction in dependence on food aid.

‘. . . [E]ven though IBLI does not offer complete protection against herd loss, it is a promising option for addressing poverty traps that arise from catastrophic drought risk. Uptake has had a range of benefits for those insured, including improved wellbeing and a reduction in drastic coping strategies when drought strikes.’

Read the whole article in the Guardian Professional: Livestock insurance could protect cattle-herders in Africa from drought, 30 Sep 2014.

Andrew Mude is a principal economist at ILRI, where he leads the IBLI project; Bryn Davies is IBLI’s market and capacity development manager.

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