Pastoralists will be able to access financial services for drought mitigation through a new initiative that is meant to help reduce livestock losses and livelihoods.
The project, named DRIVE (De- Risking Inclusion and Value Enhancement of Pastoral Economies) will focus on areas including value chains, and facilitate the livestock trade in the Horn of Africa (Kenya, Ethiopia, Somalia, and Djibouti).
“Managing drought shocks, encouraging herders to offload animals that are ready for market and supporting private sector investments in livestock product value chain will unlock the potential of the pastoral production system. The economic impact of floods and droughts is estimated to create an average fiscal liability of 2 percent to 2.4 percent of GDP annually,” said Agriculture Cabinet Secretary, Hon. Mithika Linturi.
Drought insurance, enhanced trade linkages, and economic integration are priorities for the Horn of Africa Initiative (HoAI), where the DRIVE project is anchored on. The project leverages the learnings of Kenya Livestock Insurance Program (KLIP) and Satellite Index Insurance for Pastoralists (SIIPE) in Ethiopia.
The initiative funded by the World Bank will be hosted by the State Department of Livestock (SDL) in partnership with ZEP-RE (PTA Reinsurance Company), Kenya Development Corporation (KDC).
Harry Kimtai, Principal Secretary, State Department for Livestock Development Ministry of Agriculture and Livestock Development, stated that whereas severe drought on average affects 3.4 million people in each drought cycle in the country, the most affected regions are Arid and Semi-Arid Lands. “The DRIVE project will focus on building the resilience of the Pastoral economies by protecting against drought risk and increasing financial inclusions of pastoralists through better connections to the markets, thus facilitating trade and upgrading value chains by mobilizing private investments.”
The project is designed to be a public-private partnership, and according to James Sina, Special Financial Specialist at the World Bank, “By bringing together expertise from these different sectors, the opportunities to leverage on knowledge and infrastructure from the stakeholders can bring synergy while implementing, and in the long run providing sustainable solutions in supporting pastoral communities beyond the project funding timelines.”
The DRIVE project is divided into two components. ZEP-RE (PTA Reinsurance Company) is the implementing agent for component 1, managing the funds worth US$75 million to deliver a financial package that includes a livestock insurance product, a savings bonus product to promote a savings culture and delivery of these financial products through digital accounts for pastoralists.
Hope Murera, CEO of ZEP-RE (PTA Reinsurance Company), highlighted that the program is structured specifically for the drought period, insuring pastoralists before short and long rain where the pastoralists will contribute 20 percent and the government supporting by contributing 80 percent subsidy of the insurance premiums.
Kenya Development Corporation (KDC) is the implementing agent of component 2, managing funds worth US$40 million to crowd in private sector finances by derisking livestock value chains and supporting viable investment opportunities that integrate pastoralists to unlock livestock trade potential for the country.
Norah Ratemo, Acting Director General of KDC, notes that while the US$40 million is not sufficient, KDC will incentivize the private sector by investing along the value chain where they derisk investments with matching funds arrangement. This also offers an opportunity to formalize the sector and position it for sustainable trade also improve.
The State Department of Livestock will oversee the overall project coordination and delivery of public sector responsibilities. It will ensure linkages between the two components and coordinate implementation with the Counties.
Going forward, the State Department of Livestock and the implementing agents will sign a Memorandum of Understanding with the counties with clear roles and modalities in the project coordination and implementation.