Framing the Discussion: Developing IBLI Ethiopia Research Agenda Pin Chantarat Cornell University

1. Framing the Discussion: Developing IBLI Ethiopia Research Agenda Pin Chantarat Cornell University July 12, 2010

2. 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

3. Existing Data Longitudinal household data GELANA ABAYA BORE URAGA ADOLANA WADERA ODO SHAKISO HAGERE MARYAM Negele Finchawa Qorate LIBEN Yabelo Arero TELTELE ARERO Dillo MOYALE DIRE Moyale Borana and Guji Zones Note on Studied Sites: PARIMA’s Kebele Desta’s Town Center • 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 YEBELO Dida Hara Wachille Mega KENYA KENYA

4. Existing Data Longitudinal household data • Livelihood/ Poverty and Climate (PARIMA 2000-02)

5. 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* • PARIMA (2000-02)

6. Existing Data NDVI and Livestock Mortality Satellite imagery NDVI (8km resolution, available every 10 days in real-time) Drought 2000 Drought 2009 Good forage condition 2010 Standardized NDVI Drought 84-85 Drought 90-91 Drought 99-00 Drought 05-06 Drought 09 Key Questions: Other longitude household-level data? Verification of past data? The need to collect recent herd recalls? Area livestock loss (%) (Recalls from Desta 1981-97, PARIMA 1998-2002)

7. Scoping Mission (2010) • Objectives • To introduce IBLI to local communities/authorities • FGD to learn the local opinions on IBLI • To meet with local authorities, financial institutions, NGOs • Key discussions • Contract design (Group-based, ex-ante payout) • Delivery mechanism • Climate change

8. Contract design/delivery/regulation Group-based IBLI Financial Institution Financial Institution Financial Institution • i • i • i • i • i • i • i • i • i • G • G • 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

9. Contract design/delivery/regulation Group-based IBLI • Existing groups/cooperatives network • Commercial banks (loans)/ NGOs (seed grants) • NGOs (restocking programs, etc) Key Questions: How do groups/cooperatives operate individually; as a network? What are regulatory pre-requisites for group-based IBLI?

10. Contract design/regulatory Ex ante/ Ex post payout Start of the contract Observed loss • Ex-ante payout • for asset protection • 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: Which product could provide more effective risk management? What are regulatory pre-requisites of ex-ante product?

11. Delivery Mechanisms Availability of finance GELANA ABAYA BORE URAGA ADOLANA WADERA ODO SHAKISO HAGERE MARYAM Negele Finchawa Qorate LIBEN Yabelo TELTELE ARERO Dillo MOYALE DIRE Moyale • Existing financial institutions and local NGOs Commercial Bank of Ethiopia Commercial Bank Oromia International Bank Lagula YEBELO Dida Hara Wachille Arero Mega KENYA Key Questions: What can be potential delivery mechanism given sparsity of financial institutions? 2. What might be roles of local NGOs in IBLI delivery mechanism? Local NGOs Main offices Extended offices (in every Woreda)

12. Climate change adaptation/mitigation Awareness • 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? • Existingcommunity awareness in:

13. Climate change adaptation/mitigation Actions • 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 Key Questions: What are the prioritized climate change adaptation activities in the areas? Current projects? Current incentive mechanisms? How to create extension messages to enhance community awareness?

14. Framing the Discussion: Developing IBLI Ethiopia • Four themes to be discussed in the next session: