Options for enhancing resilience in pastoral systems Shirley Tarawali, Andrew Mude, Jan de Leeuw, Mario Herrero, Silvia Silvestri, Susan MacMillan Brussels Policy Briefing no.26 New challenges and opportunities for pastoralism in ACP countries 22 February 2012 1 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 2 Rangelands and pastoral communities Tropical arid and semi-arid rangeland based systems population density less than 20 persons/km² length 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 Food insecurity Market shocks Conflict Under investment Poor capacity to cope Future climate change Disease outbreak Options to improve resilience Increasing resilience (adaptive capacity) Securing assets Diversification Animals Markets Natural resources Payment for Ecosystem Services 9 Increasing resilience Main cause of vulnerability Securing assets Diversification Animals Markets Natural resources Payment for Ecosystem Services 10 Impact of Drought on Livelihoods Cause of Livestock Mortality • Drought is by far the leading cause of livestock mortality • Disease and Predation likely to be directly related to drought Component Shares of Income • 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. DATA • Livestock Mortality • Remotely-Sensed vegetation index Response Function Index • Predicted Livestock Mortality 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. 14 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 15 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. 16 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 17 Thank you www.ilri.org/ibli www.ilri.org