The arid and semi-arid lands of northern Kenya and southern Ethiopia are regularly hit by regional droughts. These can have particularly severe impacts on pastoralist households who have almost non-existent communication and transport options and who depend on livestock for food, income, and as their main form of savings.
These challenges led the IBLI team to use the Normalized Difference Vegetation Index (NDVI) collected by satellites to develop an innovative new insurance scheme. NDVI was found to have a high correlation with forage availability in the project area (Wandera and Mude 2013). 1 Since the livestock in East African pastoral systems depend almost entirely on forage for their nutrition, NDVI serves as an indicator of the vegetation available in the area and is thus linked to livestock mortality.
In Kenya, an index was calibrated using data on livestock mortality, collected monthly since 2000. The index was then based on the relationship between predicted livestock mortality and forage availability. Due to a lack of livestock data in Borana, Ethiopia, the index triggers a payout when cumulative deviation of NDVI falls below the 15th percentile of historical vegetation growth in a given season. The programme was launched in Marsabit in northern Kenya in January 2010 and now reaches three regions in northern Kenya (Marsabit, Isiolo and Wajir), plus the Borana region of southern Ethiopia.
Relationship to CSA
IBLI greatly enhances the resilience of pastoralists due a reduction in the short term risk of asset loss or sale resulting from seasonal droughts in the arid and semi-arid lands of Kenya and Ethiopia. In the longer term, climate change projections point to greater climate variability in East Africa leading to more than one drought every five years, thus increasing the relevance of IBLI in the future.
Impact and lessons learned
IBLI has already reached more than 4,000 pastoralists. Evaluation by Janzen and Carter (2013) 2 found strong evidence that IBLI provides substantial and immediate development benefits in the event of a payout, as participating households are less likely to sell livestock, more likely to buy livestock from others, and more likely to become self-reliant for food consumption.
CCAFS Big Facts - Index-based livestock insurance to increase climate resilience of pastoralists in Kenya and Ethiopia: https://ccafs.cgiar.org/bigfacts/#theme=evidence-of-success&subtheme=services&casestudy=servicesCs2
Wandera B, Mude A. 2013. Index Based Livestock Insurance (IBLI) in Northern Kenya, the product, its impact and the way forward. Nairobi, Kenya: International Livestock Research Institute.http://ilri-events.wikispaces.com/file/view/Index+Based+Livestock+Insurance+in+Northern+Kenya+Experience+and+way+forward.pdf This document provides information on index based livestock insurance in Northern Kenya. The document explains how this particular insurance product functions, and goes into detail into the specific case study with an overview of impacts as well as the challenges faced in the process.
Janzen S, Carter M. 2013. The impact of micro-insurance on asset accumulation and human capital investments: evidence from a drought in Kenya. Research Paper no. 31. Geneva, Switzerland: International Labour Organization.http://www.ilo.org/public/english/employment/mifacility/download/repaper31.pdf When natural disasters strike in developing countries, households are often forced to choose between preserving assets or destabilizing consumption: either can result in permanent consequences. In this paper we ask: can insurance transfer risk in a way that reduces the need for households to rely on costly coping strategies that undermine their future productivity? Since 2010, pastoralists in northern Kenya have had access to a novel index-based drought insurance product. We take advantage of an insurance payout induced by a drought in 2011 to analyze the immediate impacts of this microinsurance pilot on expected asset accumulation and human capital investments. Our results show that insured households are on average 22-36 percentage points less likely to anticipate drawing down assets, improving their ability to recover after the drought. This effect is larger for livestock-rich households who are most likely to compromise assets in response to a negative shock. We also show that insured households are on average 27-36 percentage points less likely to anticipate reducing meals than their uninsured counterpart. This second impact is stronger for livestock-poor households who are most likely to destabilize consumption. By improving food security during a drought, we also find that insured households are less dependent on food aid and other forms of assistance