The Horn of Africa is amongst the poorest and most fragile regions in the world and pastoralist communities are the most vulnerable. The region is exposed to climate shocks with severe droughts fueling poverty and conflicts.
Pastoralism and livestock production are the main sources of livelihood and contribute to over one-third of the agricultural GDP in most countries and approximately 80 percent of the GDP in Djibouti and Somalia.
When drought hits, livestock either die or are sold at rock-bottom prices. Evidence shows that when pastoralists lose half of their livestock, it can take up to 10 years to rebuild, during which they incur losses in welfare, nutrition, and income. The current drought in the Horn of Africa is the worst seen in 40 years.
The HoA DRIVE Project: A regional approach to deal with a regional challenge
The De-risking, Inclusion and Value Enhancement of Pastoral Economies in the Horn of Africa (DRIVE) project was launched jointly by the Republic of Djibouti, the Federal Democratic Republic of Ethiopia, the Republic of Kenya, and the Federal Government of Somalia in late August 2022.
It will enable the region to adapt to the impacts of climate change with access to financial services, commercialize livestock production in pastoralist communities, and ensure inclusion for women, as well as marginalized and vulnerable groups. These countries have decided to take a regional approach to deal with a regional challenge.
Component One — Financial resilience to climate shocks
While emergency aid is a crucial part of the response, it can take time to reach the most vulnerable and often arrives after livestock have perished. It is essential to improve the long-term resilience and adaptation capacity of affected populations.
Improving the financial inclusion of vulnerable households has proven to be a very efficient solution to build resilience: savings on deposit accounts can help individuals cope with the smaller struggles, while insurance and emergency credit can provide liquidity during major shocks. Digital tools can accelerate access to emergency cash.
A small payout from an insurance product at the onset of a drought or access to savings allow pastoralists to buy water, fodder, and medicine to help keep their animals alive. Studies have shown it is three times cheaper than restocking.
DRIVE will co-finance a package of financial services in Ethiopia, Kenya and Somalia, including livestock insurance (also called Index Based Livestock Insurance, or IBLI), savings, and digital payment accounts. This will be complemented by financial literacy training to improve pastoralists’ understanding of the financial products.
A feasibility study on index insurance in Djibouti showed the value of the program was limited. Instead, the country has requested a climate risk sovereign insurance product for flood and drought with the African Risk Capacity Group.
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