Sustainable livelihoods through livestock farming in East Africa Carlos Ser é, Director General October 2008

Why livestock matter for poor people 600 million people depend directly on livestock for their livelihoods Most live in Sub Saharan Africa & South Asia Demand for livestock products growing rapidly in the developing world Research driven interventions can make this demand led growth more pro poor Targeting vulnerable groups such as women and children critical for achieving MDGs impact

600 million people depend directly on livestock for their livelihoods

Most live in Sub Saharan Africa & South Asia

Demand for livestock products growing rapidly in the developing world

Research driven interventions can make this demand led growth more pro poor

Targeting vulnerable groups such as women and children critical for achieving MDGs impact

Diverse livestock farming systems and market conditions in East Africa Provides wide range of development and policy contexts for building sustainable livelihoods

Provides wide range of

development and

policy contexts for

building sustainable

livelihoods

Agenda for pro-poor livestock in Africa Enhance livestock productivity and market opportunities for the poor Technologies for science based solutions Institutional and organizational innovations for service delivery Enabling policies Reducing risk, vulnerability and promoting asset building Technologies to secure livestock assets Instruments to manage risk Institutional and organizational innovations for service delivery

Enhance livestock productivity and market opportunities for the poor

Technologies for science based solutions

Institutional and organizational innovations for service delivery

Enabling policies

Reducing risk, vulnerability and promoting asset building

Technologies to secure livestock assets

Instruments to manage risk

Institutional and organizational innovations for service delivery

Productivity and markets: technology for solutions Feeding and animal nutrition Dual purpose crops e.g maize Improved forages (e.g Napier grass) Managing feed scarcity Generating income from feed sale Animal genetics and reproductive technologies Breeding for disease resistance e.g Internal parasites Artificial Insemination to increase milk productivity in dairy cows Sexed semen, in vitro fertilization, embryo transfer

Feeding and animal nutrition

Dual purpose crops e.g maize

Improved forages (e.g Napier grass)

Managing feed scarcity

Generating income from feed sale

Animal genetics and reproductive technologies

Breeding for disease resistance e.g Internal parasites

Artificial Insemination to increase milk productivity in dairy cows

Sexed semen, in vitro fertilization, embryo transfer

Productivity and markets: technology for solutions Animal health Vaccines vs East Coast Fever Tryps control through “pour ons” Internal parasite management in small ruminants Improved diagnostics to enable market access Rift valley fever – enhancing response capacity for protecting human and animal health

Animal health

Vaccines vs East Coast Fever

Tryps control through “pour ons”

Internal parasite management in small ruminants

Improved diagnostics to enable market access

Rift valley fever – enhancing response capacity for protecting human and animal health

Productivity and markets: Innovations for service delivery Business development services to deliver information and technical advice (Kenya, Uganda, Rwanda) Delivering animal health products through community based models (Ghibe, Ethiopia)

Business development services to deliver information and technical advice (Kenya, Uganda, Rwanda)

Delivering animal health products through community based models (Ghibe, Ethiopia)

Community based animal health Ghibe valley in Ethiopia Community based animal health schemes now used to control trypanosomosis (sleeping sickness) in cattle Farmer cooperatives organize treatments, purchase drugs, monitor disease Transformed Ghibe Valley now cattle part of farming system and generating income

Ghibe valley in Ethiopia

Community based animal health schemes now used to control trypanosomosis (sleeping sickness) in cattle

Farmer cooperatives organize treatments, purchase drugs, monitor disease

Transformed Ghibe Valley now cattle part of farming system and generating income

Productivity and markets: Supportive policy environment Dairy policy that supports smallholder development in Kenya by allowing informal milk markets ILRI now working with ASARECA to scale up Kenyan model for pro-poor dairy policy to East Africa Spill over to Asia (Assam)

Dairy policy that supports smallholder development in Kenya by allowing informal milk markets

ILRI now working with ASARECA to scale up Kenyan model for pro-poor dairy policy to East Africa

Spill over to Asia (Assam)

Reducing risk, vulnerability and asset building Reducing risk and vulnerability is central to pro-poor livestock in challenging areas Provides safety nets for poor people Enhance capacity to invest in viable but risky enterprises with higher returns

Reducing risk and vulnerability is central to pro-poor livestock in challenging areas

Provides safety nets for poor people

Enhance capacity to invest in viable but risky enterprises with higher returns

Risk, vulnerability & assets: innovative instruments Payments for ecosystem services for adaptation to climate change and diversified livelihoods e.g Kitengela Index based livestock insurance products to insure against climatic and other shocks that affect whole communities

Payments for ecosystem services for adaptation to climate change and diversified livelihoods e.g Kitengela

Index based livestock insurance products to insure against climatic and other shocks that affect whole communities

Innovative ways of dealing with climatic shocks: Index Based Livestock Insurance

Motivation and goal Traditional Insurance too costly for remote, smallholder populations. Monitoring costs too prohibitive. Heightens the standard problem of moral hazard. New innovations in insurance design – index-based insurance products – alleviate problems associated with traditional insurance. Undertake research to inform design, development and implementation of index-based insurance (IBLI) products to protect livestock keepers - particularly in Arid and Semi Arid Lands

Traditional Insurance too costly for remote, smallholder populations. Monitoring costs too prohibitive. Heightens the standard problem of moral hazard.

New innovations in insurance design – index-based insurance products – alleviate problems associated with traditional insurance.

Undertake research to inform design, development and implementation of index-based insurance (IBLI) products to protect livestock keepers - particularly in Arid and Semi Arid Lands

IBLI: What is it? Insurance product that offers policy holders a payout based on an external indicator which triggers payout to all insured clients within a geographically defined space. Well suited to insuring risks that affect many members of a community at the same time (highly covariate) and are well correlated with an external indicator. IBLI is thus well suited to insuring against risks such as livestock mortality that are closely correlated with climactic outcomes. Payout based on an indicator variable (the index) that is highly associated with the event being insured but is not prone to manipulation by either the insured or insurer So, if one is insuring against livestock mortality, then an indicator such as rainfall or forage availability may be suitable

Insurance product that offers policy holders a payout based on an external indicator which triggers payout to all insured clients within a geographically defined space.

Well suited to insuring risks that affect many members of a community at the same time (highly covariate) and are well correlated with an external indicator.

IBLI is thus well suited to insuring against risks such as livestock mortality that are closely correlated with climactic outcomes.

Payout based on an indicator variable (the index) that is highly associated with the event being insured but is not prone to manipulation by either the insured or insurer

So, if one is insuring against livestock mortality, then an indicator such as rainfall or forage availability may be suitable

IBLI offers advantages over traditional insurance Unlike conventional insurance which requires measurement & verification of individual losses, index insurance pays off based on an easily observable regional index Advantages Low transactions costs Eliminates incentive problems (moral hazard & adverse selection) Should be sustainable and provided by market mechanisms Disadvantages Partial insurance (“Basis Risk”) – individual experience may be different from the average experience which the index captures

Unlike conventional insurance which requires measurement & verification of individual losses, index insurance pays off based on an easily observable regional index

Advantages

Low transactions costs

Eliminates incentive problems (moral hazard & adverse selection)

Should be sustainable and provided by market mechanisms

Disadvantages

Partial insurance (“Basis Risk”) – individual experience may be different from the average experience which the index captures

Elements of an IBLI product Define a specific area of coverage (district/divisional/agro-ecology) Set risk to be insured against (drought related livestock mortality) Define index and model association between index and drought related mortality (currently using satellite based rainfall and forage variables) Define index insurance trigger for level of mortality to insure against (e.g., greater than 15% mortality in insured area over contract period) Set contract terms and calculate premiums based of trigger rate and contract terms Payment is made if index contract area is triggered within contract period.

Define a specific area of coverage (district/divisional/agro-ecology)

Set risk to be insured against (drought related livestock mortality)

Define index and model association between index and drought related mortality (currently using satellite based rainfall and forage variables)

Define index insurance trigger for level of mortality to insure against (e.g., greater than 15% mortality in insured area over contract period)

Set contract terms and calculate premiums based of trigger rate and contract terms

Payment is made if index contract area is triggered within contract period.

Piloting an IBLI contract in Marsabit Innovation systems work to scope for opportunities, actors, linkages, entry points Analytical work to inform contract design Introducing IBLI products to clients Investigating demand and willingness to pay Assessing delivery channels Engaging insurance companies Pilot test IBLI schemes with development agencies and private sector (March 2010 – expected pilot roll-out) Monitor and evaluation program to learn lessons and guide scaling out. Successful pilot expected to result in commercially sustainable provision of product. Insurance companies and partners take lead for scaling out.

Innovation systems work to scope for opportunities, actors, linkages, entry points

Analytical work to inform contract design

Introducing IBLI products to clients

Investigating demand and willingness to pay

Assessing delivery channels

Engaging insurance companies

Pilot test IBLI schemes with development agencies and private sector (March 2010 – expected pilot roll-out)

Monitor and evaluation program to learn lessons and guide scaling out.

Successful pilot expected to result in commercially sustainable provision of product. Insurance companies and partners take lead for scaling out.

Women and risk management Women’s groups play a significant role in household risk management through group saving and social insurance practices. Pastoralist women saving cash and mutual insurance practices Makes them targets for use of index based insurance, Contribute their knowledge and experience in product development Women’s holding of different species and income flows may mean that they will have distinct needs in an IBLI product Delivery channels which are suited to women’s group members may be different to those which are appropriate for men and mobile pastoralists

Women’s groups play a significant role in household risk management through group saving and social insurance practices.

Pastoralist women saving cash and mutual insurance practices

Makes them targets for use of index based insurance,

Contribute their knowledge and experience in product development

Women’s holding of different species and income flows may mean that they will have distinct needs in an IBLI product

Delivery channels which are suited to women’s group members may be different to those which are appropriate for men and mobile pastoralists

Livestock and nutrition Livestock is key in household nutrition strategies : Projects that link smallholders to markets, should understand intra household dynamics and trade-offs between food consumption and income generation

Animal Source Foods and nutrition Studies in Egypt, Kenya and Mexico found strong statistical associations between the intake of ASF and outcomes such as better growth, cognitive function, activity levels, pregnancy outcomes, and morbidity Feeding trial on effects of milk and meat on school children confirmed findings, showing diet quantity and quality matter for children’s physical activity and social behaviour Livestock ownership (dairy cows and buffalo) was positively related to children’s nutritional status only if milk was actually consumed by the children and not all sold commercially

Studies in Egypt, Kenya and Mexico found strong statistical associations between the intake of ASF and outcomes such as better growth, cognitive function, activity levels, pregnancy outcomes, and morbidity

Feeding trial on effects of milk and meat on school children confirmed findings, showing diet quantity and quality matter for children’s physical activity and social behaviour

Livestock ownership (dairy cows and buffalo) was positively related to children’s nutritional status only if milk was actually consumed by the children and not all sold commercially

Integrating innovations into livestock value chains East Africa Dairy Development

Overall Goal To transform the lives of 179,000 families—or approximately one million people —by doubling household dairy income by year 10 through integrated interventions in dairy production, market-access and knowledge application Beneficiaries: 169,000 poor smallholder dairy families that earn less than $2 per adult equivalent per day and have 1-5 cows 10,000 Fodder producers that earn less than $ 2 per adult per day US$ 48 million investment

To transform the lives of 179,000 families—or approximately one million people —by doubling household dairy income by year 10 through integrated interventions in dairy production, market-access and knowledge application

Beneficiaries:

169,000 poor smallholder dairy families that earn less than $2 per adult equivalent per day and have 1-5 cows

10,000 Fodder producers that earn less than $ 2 per adult per day

US$ 48 million investment

Three major objectives To generate information for evidence based decision-making on the dairy value chain and to develop innovative solutions for use of resources that increase income To expand dairy markets and increase market access for smallholder farmers To increase dairy productivity and efficiency in a sustainable manner

To generate information for evidence based decision-making on the dairy value chain and to develop innovative solutions for use of resources that increase income

To expand dairy markets and increase market access for smallholder farmers

To increase dairy productivity and efficiency in a sustainable manner

Confronting Complexity Challenges Business model Conflicting objectives and trade-offs Opportunities The hub concept Multi-country project

Challenges

Business model

Conflicting objectives and trade-offs

Opportunities

The hub concept

Multi-country project

EADD project model: Dairy Hubs

Dairy Sector Value Chain Farmer ILRI Consumer ICRAF Techno Serve Heifer ILRI Techno Serve Techno Serve Techno Serve ILRI Heifer ABS

Monitoring & Evaluation Essential step towards greater effectiveness and accountability in projects and programs Two dimensions Outcome and impact: welfare improvement from project and program interventions Overall performance and achievements: What works, what does not work, why, and in what context

Essential step towards greater effectiveness and accountability in projects and programs

Two dimensions

Outcome and impact: welfare improvement from project and program interventions

Overall performance and achievements: What works, what does not work, why, and in what context

Conclusions In Africa livestock are key to sustainable livelihoods of the poor Sustainable hunger reduction has to address productivity and vulnerability of households, and needs of specific target groups such as women and children No “silver bullets” but need to integrate technologies, improved institutions, and conducive policies Need integrated set of actions along specific value chains – building on core competencies of a wide range of actors along the research to delivery continuum Complex task requiring effective managerial approaches to tackle complexity in pragmatic ways Learn quickly - Use lessons to improve strategy and sharpen operations to maximize sustainable impact

In Africa livestock are key to sustainable livelihoods of the poor

Sustainable hunger reduction has to address productivity and vulnerability of households, and needs of specific target groups such as women and children

No “silver bullets” but need to integrate technologies, improved institutions, and conducive policies

Need integrated set of actions along specific value chains – building on core competencies of a wide range of actors along the research to delivery continuum

Complex task requiring effective managerial approaches to tackle complexity in pragmatic ways

Learn quickly - Use lessons to improve strategy and sharpen operations to maximize sustainable impact