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Options for enhancing resilience in pastoral systems

Shirley Tarawali, Andrew Mude, Jan de Leeuw, Mario Herrero, Silvia Silvestri, Susan MacMillan

Brussels Policy Briefing no.26New challenges and opportunities for pastoralism in ACP countries

22 February 2012

Key messages Rangelands constitute the largest land use system globally, and pastoral

communities are the environmental stewards of much of these The resilience or adaptive capacity of pastoral communities, and the

natural resources on which they depend can be improved by:– Securing assets– Providing opportunities for diversification

Index based livestock insurance has the potential to counteract excessive vulnerability to drought, which will mitigate ad hoc coping strategies.

Some of the significant public development investment in post hazard drought responses could go towards subsidizing insurances to keep these affordable for the poor and to buttress pastoral livelihoods against the effects of drought

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Rangelands and pastoral communities

Tropical arid and semi-arid rangeland based systems

population density less than 20 persons/km²length of growing period (LGP) less than 60 days/annum

no significant crop production possible

Largest land use system on earth

35 million km2 – 24% of the total land area Support 50% of the World’s livestock

200 million people depend on rangelands for livelihoods

Half live on less than $2/day

Vulnerability

Climate variability

Future climate change

Food insecurity

Conflict

Poor capacity to cope

Under investment

Market shocks

Disease outbreak

Options to improve

resilience

Increasing resilience (adaptive capacity)

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Increasing resilience

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Main cause of

vulnerability

Impact of Drought on Livelihoods

Cause of Livestock Mortality Component Shares of Income

• Drought is by far the leading cause of livestock mortality

• Disease and Predation likely to be directly related to drought

• Sale of livestock and livestock productions constitute 40% of household income

• External support (food and cash) make up nearly 25% of household income

Livestock Share of Productive Assets (Median 100%, Mean 49%)Data source: Project baseline 2009 (924 Marsabit Households)

Mitigating animal asset

loss

Index-Based Livestock Insurance (IBLI)•An innovative insurance scheme designed to protect pastoralists against the risk of drought related livestock deaths

•Based on satellite data on forage availability- NDVI , this insurance pays out when forage scarcity is predicted to cause livestock deaths in an area.

IBLI PILOT

•First launched in Northern Kenya in Jan 2010. Sold commercially by local insurance company UAP with reinsurance from Swiss Re

•Ethiopia pilot to be launched in Aug 2012.

Lessons and Challenges from the Pilot

It is feasible to design index-based livestock insurance contracts attractive to both pastoralists to individually purchase and to commercial financial institutions that must market, sell and underwrite the products

– Pastoralists bought the insurance– Commercial Insurance Company, Insurance Agent and Reinsurance company

involved

There appears to be considerable demand for IBLI– More than 3,000 pastoralists have purchased the IBLI contract– More than 600 of them receive indemnity payments after the drought in

October 2011

Extension for informed decisions: Creative education tools can help pastoralists to rapidly grasp the IBLI concept.

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Lessons and Challenges from the Pilot Cost effectiveness and density

of delivery channels is critical for success and commercial viability.

– Successive improvements in ICT infrastructure has been used for product delivery - premium collection and indemnity payments – leading to generalized market development

Private-Public Provision– Challenges in the varied

incentives of private partners stressing copyright and profit and partner public institutions (such as ILRI) interested in identifying, testing and scaling innovative solutions that leverage the market to enhance livestock related-livelihoods of the poor

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The Case for Public Provision Development agencies and governments spend a lot of resources

on drought response activities IBLI:

– proactive market approach to complement reactive drought expenditure– contribute to shifting the paradigm from response to development.– social safety net securing the productive assets of these vulnerable

populations

ILRI has in place a rigorous impact assessment study on the social and economic welfare impacts of IBLI that will help the efficient targeting of public investments for livestock insurance.

Most agricultural insurance programs receive subsidies:– US agricultural insurance program – Farmers only pay 40%

of the actuarially fair premium.– India, with one of the worlds largest index-insurance

programs in the world provides a 50% subsidy to farmers.

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Key messages Rangelands constitute the largest land use system globally, and pastoral

communities are the environmental stewards of much of these The resilience or adaptive capacity of pastoral communities, and the

natural resources on which they depend can be improved by:– Securing assets– Providing opportunities for diversification

Index based livestock insurance has the potential to counteract excessive vulnerability to drought, which will mitigate ad hoc coping strategies.

Some of the significant public development investment in post hazard drought responses could go towards subsidizing insurances to keep these affordable for the poor and to buttress pastoral livelihoods against the effects of drought

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Thank youwww.ilri.org/ibliwww.ilri.org