Kenya's drought insurance scheme shelters herders from financial storm | Daniel Howden

New index-based livestock insurance protects vegetation rather than animals. But can it generate trust within the community?

It was almost inevitable that the day chosen to make the first drought insurance payments in Wajir, in the arid north-east of Kenya, would be the same day the rains came.

Herders who lost sheep, cattle and camels in the scorching first quarter of the year sheltered from the storm in an airless hall waiting for the cheques from an innovative new scheme that seeks to break the drought-and-bust cycle blighting pastoralists across the Horn of Africa.

No one among the weathered ranks of Somali herders thought a day of rain was a sign of easier seasons to come. "Drought is always going to come," said the county governor, Ahmed Abdullahi Mohamad. "If you have rains for two years you know that in the third year they will fail. The question is how we build the systems to deal with drought."

This is a question that has hung over Andrew Mude, a Kenyan economist, for the past six years. Working with the International Livestock Research Institute (ILRI) in the capital, Nairobi, he has brought to bear satellite technology and 30 years of data on drought and herd losses in quest of a solution.

It is impossible to monitor, accurately, the deaths of animals in herds that range across some of the most remote and inhospitable terrain on Earth, so Mude elected to concentrate on what could be measured – the vegetation. Freely available satellite images show the condition of pasture, or forage, in sufficient detail to calculate the extent of drought. His index-based livestock insurance works by protecting the vegetation, not the animals. When a drought is calculated to have exceeded a certain trigger level (15% in Wajir) the insurer pays out.

Designing a smart product is one thing, persuading people whose livelihood has remained largely unchanged for decades – if not centuries – is another. Few of the Kenyan-Somalis whose animals range across the semi-arid expanse around Wajir have any experience of insurance; only a handful of them are car or motorbike owners, or would insure their home or its contents. "People must learn that the insurance will pay off," Mude said. "We must generate trust and, as with any business, early adopters are a minority."

Like so many of his peers, Ahmed Mohamed, 21, a herder, has been slowly rebuilding his numbers after the last serious drought in 2011, where he lost two-thirds of his 30 goats and sheep. This year he has lost three of his animals. It was enough to persuade him to try something new. He insured five of the herd for 2,000 Kenyan shilings (£14) and has received most of it back with an indemnity of £13 after a comparatively mild failure of the rains.

One of his father's friends, Abdi Aden Bule, 65, hopes the insurance can prevent another disaster like the one he suffered during the severe drought three years ago. From being a "wealthy man" with 50 head of cattle, 200 sheep and goats and 10 camels, he was left with two camels, 10 cows and 30 goats.

"The drought doesn't say when it's coming but comes," he said. "But there's not any other source of wealth here, we are not farmers and we have no arable land. At least if you have animals you will not go hungry."

The ILRI's other major challenge has been to persuade insurance companies to partner with them. That was until he found Hassan Bashir, the chief executive of Takaful insurance, and the son of a herder from Wajir. Bashir recognised the potential immediately and was able to persuade his shareholders that it was worth the risk, despite knowing that it would take at least five years for Takaful to see a return.

While the scheme's clients are confined to one area, it means that everyone who pays in is paid out every time the drought trigger is activated. "In one area it's weak but if we can get the whole of the Horn of Africa, if we can get all the counties, we will have critical mass."

This kind of ambition has attracted donors such as the UK and Australia, which have been willing to commit funds to educating herders about the benefits of insurance. Lisa Phillips, head of the UK Department for International Development in Kenya, who attended the payout ceremony, believes it is worth taking a punt on schemes that have the potential to break through ingrained poverty. "It's cheaper than providing humanitarian assistance (after a drought)," she said. "We're building resilience now to avoid spending loads of money later."


Daniel Howden in Wajir

The GuardianTramp

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