Kenyan farmers: Insure my cows

Wednesday, April 16, 2014

Not the end of the boy’s world if his cow can’t survive

advertisements

A new kind of insurance may protect herders against drought

AS WELL as a cheque for $700, a knowing look passed between Hassan Bashir and Bashir Mohamed, his 80-year-old father. A payment at a ceremony for herders in Wajir, a town near Kenya’s border with Somalia, settled an argument dating back to 1997, when the son moved into the insurance business. Mr Bashir, born into a cattle-herding Somali family in the rugged north-east of Kenya, was told that his career choice was not only odd but un-Islamic. Many imams say that sharia law does not sanction conventional insurance, deeming it to contain elements of gambling.

Despite being proud of his earning power, Mr Bashir found his father would not touch the money. He would not even accept the cash to go on the haj, the pilgrimage to Mecca. “He did not know anything about insurance,” said the son. “He just knew it was wrong.”

His family’s disapproval persuaded Mr Bashir to set up Takaful, Kenya’s first sharia-compliant insurance company. It offers mutual or “charity insurance”, whereby the insurer acts as an agent, charging a set fee rather than un-Islamic interest. But Mr Bashir would not stop at insuring his community’s cars, homes and businesses; he wanted to solve their biggest problem, the loss of livestock to drought.

That proved harder. Insuring animals who range with semi-nomadic herders across some of the harshest terrain on earth had defeated all previous efforts. Eventually he came across the work of a Kenyan economist, Andrew Mude of the International Livestock Research Institute (ILRI), based in Nairobi.

Mr Mude has developed an insurance model that uses satellite images to assess the impact of drought on the vegetation that camels, cows and goats need to survive. The data allow for the severity of the drought to be factored into the size of the premium. If dry weather causes grazing to drop by at least 15%, judging by historical records, the insurer will pay out. This model “insures the grass, not the animal”, says Mr Mude. Mr Bashir’s father was paid, along with dozens of others, after his area was judged to have suffered a 23% drought. He got a cheque worth 8% of the total insured value of his beloved herd of 50 cows.

Persuading seasoned Somali herders who have been husbanding their animals the same way for centuries to pay insurance premiums has not been easy. Mr Bashir has bent the ear of local imams and sheikhs and brought in Islamic scholars. Meanwhile donors, including Britain and Australia, whose aid agencies fund ILRI, have stumped up more money to get the word out around Wajir. The only problem, Mr Bashir concedes, is that, with all his herder clients currently grazing in one area, everyone must be paid at the same time when the rains fail.

To get enough clients Takaful must recruit herders from across northern Kenya and into southern Ethiopia to spread the risk far enough so that a single drought will not clobber all its clients at once. It will be a costly undertaking; Mr Bashir expects it to make a loss for at least five years. Talking his father around to the benefits of insurance took 17 years. “This community has peculiar needs,” he says ruefully.

Home
Email

Hiiraan Online