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Microinsurance supports Kenyan cattle herders faced with drought

source : Deutsche Well et African executive

In East Africa, for numerous farmers the main “professional risk” is the death of livestock due to drought. Linked to the disappearance of pasture lands and scarcity of water sources, this risk threatens them with job loss, starvation and, ultimately, loss of life.

However, in Kenya in October 2011, about 600 herders affected by drought were compensated through a new microinsurance policy. Behind this initiative was ILRI, a research institute based in Nairobi linked to the Kenyan insurance company UAP and supported by several international cooperation agencies.

Within less than a year, around 1,000 Kenyan herders have taken out this unique insurance policy, called Index Based Livestock Insurance. They paid a premium representing between 3% and 5.5% of the value of their livestock, amounting to between $3 and $6 annually. In return, they receive compensation as soon as the satellite system that scans the state of the pasture lands predicts an average livestock loss of more than 15%. This threshold has been greatly exceeded over the last few weeks according to The African Executive’s website, which on occasion has announced losses of more than 30%.

The use of satellite, explains one of the people in charge of the initiative, is far from being a luxury in remote regions. “It would be difficult for a traditional insurer to cover this population as they would be obliged to make checks in the event of losses. However, the region is far too distant from major towns where insurance agents are situated and it would not be financially viable for them to travel to check up whether, for instance, a farmer really lost two animals of an estimated value of 300 dollars.”

The manager believes that the initiative can be reproduced elsewhere, including in Asia (note that the Institute is already working in Ethiopia and Uganda). Mobile phones could also be a useful back-up for paying compensation. However, “insurance is not by itself sufficient,” added the agronomist. Only the combination of microinsurance with “other risk-reducing strategies, such as better access to grazing lands and watering areas,” can make livestock keeping sustainable as a “very effective way to meet future food needs”.