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Insurance designed for Muslim herders makes first payout in Kenya

by Samuel Mintz | Thomson Reuters Foundation
Friday, 4 April 2014 10:30 GMT

A Masai herder walks with grazing cattle during a celebration of an initiation ceremony in the remote village of Eremit, some 80 km (50 miles) southwest of Nairobi, on November 24, 2012. REUTERS/Goran Tomasevic

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Index-based livestock insurance, based on traditional “takaful” risk sharing, aims to build resilience to drought

LONDON (Thomson Reuters Foundation) – Researchers in Kenya have developed a pioneering insurance policy for nomadic Muslim livestock herders, which has now delivered its first payout to 101 farmers to compensate them for drought losses.

The policy, which was purchased by about 4,000 pastoralists in Northern Kenya, was developed by the International Livestock Research Institute and commercially delivered by a company called Takaful Insurance of Africa. It draws on technology and ethical values to create a product aimed at increasing the resilience to drought of pastoralists in the region.

 “The key vulnerability that these people were facing was very clear: The typical boom and bust cycle in the area that occurs when severe droughts come and decimate their herds,” said Andrew Mude, who leads the research institute’s Index-Based Livestock Insurance program.

“We thought, well, insurance is a typical way that is used to help people manage loss, or recover quickly from the loss of a key asset,” he said.

Insuring pastoralist livestock is difficult, said Mude, because of the remote, isolated areas that the farmers often habitat and a lack of infrastructure. That is why index-based insurance – where a certain number of days without rain or an estimate of grazing land availability – works better than traditional insurance, which relies on attempts to verify claims on a case-by-case basis, a nearly impossible task in the region.

In this case in Kenya, the index takes into account satellite imagery to measure the conditions of grazing lands when determining payments.


For this first experiment with Islam-compatible index insurance, the researchers and insurance company also had to take into account the religious beliefs of the intended consumers.

According to an ILRI press release, the insurance policy conformed to the Islamic concept of takaful, an ancient Islamic form of insurance which involves risk-sharing among a group of participants.

The practice involves a contract called tabbaru, similar to traditional insurance, in which participants make contributions to a shared, or pooled, risk fund and can receive a payment if they are affected by drought. For this first pilot payment, the company distributed approximately $5,800 to the 101 farmers.

For Takaful Insurance of Africa, the project is a leap of faith, as they are not currently making a profit, Mude said. But the company may benefit in other ways, including mustering public support for being involved in an innovative project, or potentially benefitting if Kenya’s government at some point backs such insurance efforts, ILRI researchers said.

According to research by the ILRI team, pastoralists with insured livestock were 33 percent less likely to have to rely on food aid and also less likely to reduce feeding of infants.

Mude said he hopes the project, which ILRI will remain involved with for another three years, will eventually be self-sustaining.

Samuel Mintz is an AlertNet Climate intern.

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