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Framing the Discussion: Developing IBLI
Ethiopia Research Agenda
Chantarat (Cornell University)
Workshop on Developing Index-Based Livestock Insurance to
Reduce Vulnerability due to Drought-related Livestock Deaths
ILRI, Addis Ababa, Ethiopia
12 July 2010
Outline Developing IBLI Ethiopia Research Agenda
Key Steps
• Design a livelihood-focused IBLI
• Identify suitable contract structure
• Identify suitable delivery mechanisms
• Address impacts of climate change and induce climate
change adaptation
Key Strategies
• Existing longitudinal household and satellite-imagery data
• Scoping mission (2010)
• Framing discussions for future research agenda
PARIMA (2000-02)
• Quarterly household
survey (30 hhs/kebele)
• 5 kebeles in 4 woredas
Desta (1999)’s Herd
Recalls Data (1981-97)
• Annual household
herd recalls (~15
hhs/center)
• 35-km radius of 4
town centers
Existing Data Longitudinal household data
LIBEN
DIRE
MOYALE
AreroTELTELE
Yabelo
ODO
SHAKISO
BORE
URAGA
GELANA
ABAYA
ADOLANA
WADERA
Dillo
Negele
ARERO
Qorate
Moyale
Finchawa
HAGERE MARYAM
YEBELO
Mega
Wachille
KENYAKENYA
Dida Hara
Desta’s Town Center
PARIMA’s Kebele
Note on Studied Sites:
Borana and Guji Zones
Existing Data Longitudinal household data
Wareda DIRE ARERO LIBEN
Kebele (sampled strata) Dillo Wachille Qorate Dida Hara Finchara
Climate
Annual rainfall (mm) - 2000-2004 400 550 450 500 650
Dekadal maximum NDVI (1981-2010) 0.21 0.28 0.27 0.30 0.31
Livelihood pastoral pastoral pastoral agro-past agro-past
Income share: livestock 54% 73% 84% 58% 78%
cropping 0% 0% 0% 11% 6%
employment/business 1% 1% 0% 2% 4%
food aid 40% 19% 15% 24% 11%
Livestock
Herd size (TLU) 12 10 16 19 16
% cattle (headcount) 47% 83% 83% 56% 48%
% smallstock (headcount) 52% 9% 2% 40% 25%
Poverty headcount (0.25$/day) 1.00 0.97 0.87 0.83 0.90
Assets/Banking
Total value of other asset ($) $2.13 $11.00 $0.42 $16.29 $71.06
% have bank account 0% 0% 0% 1% 0%
YABELO
Livelihood/ Poverty and Climate (PARIMA 2000-02)
Existing Data Longitudinal household data
Livestock Mortality rate (%)
Existing Risk Management Mechanisms
• Ex-ante: migration, offtakes, supplement. feed/water
• Ex-post: restocking, group-based social insurance*
0
1
2
3
4
5
6
7
8
LR 2000 LD 2000 SR 2000 SD 2001 LR 2001 LD 2001 SR 2001 SD 2002 LR 2002
Live
sto
ck lo
ss (
TLU
) p
er
ho
use
ho
ld
Drought
Disease
CCPP
Predator
Snake bite
Accident
Aging
Others
PARIMA (2000-02)
0%
10%
20%
30%
40%
50%
1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
Livestock Mortality Recalls in Desta's Data (1981-1997)
Yabello
Mega
Negele
Arero
0%
10%
20%
30%
40%
50%
LR2000 LD2000 SR2000 SD2001 LR2001 LD2001 SR2001 SD2002 LR2002
Livestock Mortality experienced in PARIMA (2000-02)
Dida Hara
Dillo
Finchara
Qorate
Wachille
Drought 2000 Drought 2009 Good forage condition 2010
Satellite imagery NDVI (8km resolution, available every 10 days in real-time)
Liben
DireMoyale
Arero
Teltele
Yabelo
HegermariamOdo Shakiso
Bore
Uraga
Gelana Abaya
Adolana Wadera
Liben
DireMoyale
Arero
Teltele
Yabelo
HegermariamOdo Shakiso
Bore
Uraga
Gelana Abaya
Adolana Wadera
Liben
DireMoyale
Arero
Teltele
Yabelo
HegermariamOdo Shakiso
Bore
Uraga
Gelana Abaya
Adolana Wadera
-3-2-101234
0%
10%
20%
30%
40%
50%Drought 84-85 Drought 90-91 Drought 99-00 Drought 05-06 Drought 09
Area livestock loss (%) (Recalls from Desta 1981-97, PARIMA 1998-2002)
Standardized NDVI
Key Questions:
1. Other longitude household-level data? Verification of past data?
2. The need to collect recent herd recalls?
Existing Data NDVI and Livestock Mortality
Objectives
1. To introduce IBLI to local
communities/authorities
2. FGD to learn the local
opinions on IBLI
3. To meet with local
authorities, financial
institutions, NGOs
Key discussions
1. Contract design (Group-based, ex-ante payout)
2. Delivery mechanism
3. Climate change
Scoping Mission (2010)
Individual IBLI Group as delivery channel Group as client
+ Substitute for absence financial facilities in remote locations
+ Use group learning to enhance education and extension
+ Use group rules to reduce individual basis risks
+ Enhance prospect for linking credit access with insurance
-- Groups need to be well-established, participated by pastoralists
Contract design/delivery/regulation Group-based IBLI
i ii
G
Financial Institution
i ii
Financial Institution
i ii
G
Financial Institution
Existing groups/cooperatives network
Woreda Cooperative Promoting Office
Microfinance
- Loan to livestock productions
- Also loan to non-livestock enterprises
Livestock-related enterprises
- Production groups
- Marketing groups
- Trading groups
-
Non-livestock enterprises
- Cereal groups
- Other women groups, etc.
Social insurance
- Busa gonofa
- Dabbarre
- Funeral groups
Commercial banks (loans)/ NGOs (seed grants) NGOs (restocking programs, etc)
Key Questions:
1. How do groups/cooperatives operate individually; as a network?
2. What are regulatory pre-requisites for group-based IBLI?
Contract design/delivery/regulation Group-based IBLI
Ex-ante payout
for asset protection
Contract design/regulatory Ex ante/ Ex post payout
Observed lossStart of the contract
Ex-post payout
for asset replacement
IBLI payment to insured to
protect animals before drought
+ Could be cheaper to protect
animals than to replace them
- Rely on accuracy in predicting
livestock mortality ex-ante
Potential use:
• Supplementary feed and water
• Hired transport to access market
IBLI payment to insured to
replace animals after drought
+ Higher accuracy in predicting
livestock mortality
- May be more expensive to
replace animals
Key Questions:
1. Which product could provide more effective risk management?
2. What are regulatory pre-requisites of ex-ante product?
Existing financial institutions and local NGOs
LIBEN
DIRE
MOYALE
TELTELE
Yabelo
ODO
SHAKISO
BORE
URAGA
GELANA
ABAYA
ADOLANA
WADERA
Dillo
Negele
ARERO
Qorate
Moyale
Finchawa
HAGERE MARYAM
YEBELO
Mega
Wachille
KENYA
Dida Hara
Commercial Bank of Ethiopia
Delivery Mechanisms Availability of finance
Oromia International Bank
Commercial Bank
Local NGOs
Main offices
Extended offices
(in every Woreda)
Arero
Lagula
Key Questions:
1. What can be potential delivery mechanism given sparsity of
financial institutions?
2. What might be roles of local NGOs in IBLI delivery mechanism?
Climate change more/worse droughts IBLI more
expensive … mitigation to limit premium rise, adaptation to
cushion against premium rise?
Evidence of change in NDVI
Climate change?
Existing community awareness in:
Changes in climate
patterns
Changes in
rangeland/resources
Community actions that
contribute to the changes
• Unpredictable rainfall
• Increased duration and
frequency of drought
• High temperature
• Decline in grazing areas
• Decline and shorten duration
of water availability
• Lost grass species
• Charcoal burning
• Bush encroaching
• Lack of grazing control
• Expand cropping/ settlements
Climate change adaptation/mitigation Awareness
y = -6E-05x*** + 0.321
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
19
81
19
82
19
83
19
85
19
86
19
87
19
88
19
90
19
91
19
92
19
93
19
94
19
96
19
97
19
98
19
99
20
01
20
02
20
03
20
04
20
05
20
07
20
08
20
09
NDVI Trend in Dida Hara
(1981-2010)
Extant community awareness of how to deal with the changes
Very low
Existing projects that promote climate change adaptations:
• Reforestation, Development of rangeland and/or water
sources, Bush clearing to reduce rangeland degradation
• Low community participation to date
Potential linkage of IBLI Ethiopia and Climate Change
• Modeling effects of climate change in rangeland condition
Extension of community awareness
• Using IBLI to induce community participation in climate
change adaptation and mitigation activities
conditional insurance transfer linked to above activities
Climate change adaptation/mitigation Actions
Key Questions:
1. What are the prioritized climate change adaptation activities in
the areas? Current projects? Current incentive mechanisms?
2. How to create extension messages to enhance community
awareness?
Framing the Discussion: Developing IBLI Ethiopia
Contract design
(Pin Chantarat)
Delivery
mechanisms
(Brenda Wandera)
Regulatory
framework
(Andrew Mude)
Climate change
adaptation/
mitigation
(Chris Barrett)
• Group-based or
individual IBLI?
• Explore ex-ante
contracts?
• Data needs for
mortality index
• Contract terms:
TLU vs. cattle?
Fixed value or stated
value? Etc.
• Groups as clients
or as brokers or
not needed?
• Availability of
financial facilities
and linking IBLI
to credit access
• Financial
education and/or
marketing
• Risk layering
Regulatory req’ts:
• Eligible agents
• Group sales?
• Certifying index
• Ex ante products?
• Verification of
insurable interest:
TLU vs. cattle?
Fixed value or
stated value? Etc.
• Promote climate
change adaptation/
mitigation practices
• Exploring pricing
implications of CC
• Incentive
mechanisms …
conditional insurance
transfers
Four themes to be discussed in the next session: