Disaster Risk Financing

Disaster risk financing has become an essential strategy to mitigate the adverse effects of climate change and other unexpected events on vulnerable communities. In East Africa, HDA works with Governments and other partners in the region on streamlining innovative financial instruments such as index-based livestock insurance and the development of robust market connections, which together play a pivotal role in enhancing the resilience and sustainability of pastoralist economies.

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Index-Based Livestock Insurance

Index-based livestock insurance (IBLI) is a groundbreaking financial tool designed to provide pastoralists with a safety net against losses due to drought and other climate-related adversities. We work with partners such as Zep-Re on improving market penetration of these products in Ethiopia, Kenya and Somalia. This includes strengthening local insurance markets and developing unit areas of insurance.

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The effectiveness of index-based livestock insurance is significantly enhanced when pastoralists have strong market connections. Access to markets and value chain development are crucial for maximizing the benefits of IBLI. Key market connections we work on are:

 

Fodder Production - The production of fodder is essential in drought-prone regions. Pastoralists with access to markets can purchase and store fodder during times of surplus, ensuring their livestock have sufficient feed during dry spells. This reduces dependency on natural pastures and mitigates the impact of drought. We work with the private sector across Somalia to develop this sector by instituting new farming techniques, provision of seeds and improving access to local markets.

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Milk Production - Milk production is a vital source of income for many pastoralist communities. By connecting to markets, pastoralists can sell surplus milk products, increasing their income and enabling them to invest in better livestock management practices. Moreover, improved market access can lead to the establishment of milk processing units, which add value to the raw product and create additional revenue streams. We are working with nomadic communities in East Africa to improve their production capacities and access to local markets.

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Honey Production - Honey production is another lucrative avenue for pastoralists. By integrating beekeeping into their activities, they can diversify their income sources. Market connections allow them to sell honey and other bee products, fostering economic stability and reducing vulnerability to livestock losses.