Insurance for Ethiopian herders aims to combat drought, conflict

YABELO, Ethiopia (Thomson Reuters Foundation) – Nomadic livestock herders in Ethiopia have received their first payout from an insurance scheme that tracks poor pasture conditions with satellite technology.

Ethiopia has difficulty drawing full advantage from its livestock resources – the largest in Africa – because of the unreliability of pasture and water caused by persistent drought.

The new insurance scheme, known as index-based livestock insurance, aims to reduce losses, support pastoral communities, and lower the risk of conflict sparked by pastoralists migrating into agricultural areas in search of forage or water.

Coverage has been sold since July 2012 in southern Ethiopia’s Borena zone by Oromia Insurance Company (OIC), with technical assistance from the International Livestock Research Institute (ILRI), U.S.-based Cornell University, and Mercy Corps, an international development organisation. Just over 500 pastoralists took up coverage initially.

The scheme was based on an earlier insurance effort rolled out in 2010 in neighbouring Marsabit region in northern Kenya, said Andrew Mude, principal economist at ILRI in Nairobi.

There, payouts were based on livestock deaths. But “the (experience) we had with the Kenyan programme was that some animals are more hardy than others, and so (with) differential mortality rates … (it) was a bit complex,” Mude said.

The insurance offered by OIC in Ethiopia instead offers coverage based on the actual scarcity of the herders’ forage, rather than the mortality rate of their livestock.


The insurance uses NASA satellite data to look at forage availability in the Borena zone. Experts from ILRI and Cornell University compare current images with historical data from the past 30 years.

“We provide the technical expertise to understand how to use the information from satellites on the state of forage on the ground,” Mude said.

The timing and amount of insurance payouts are then calculated based on the severity of the lack of forage.

OIC’s insurance will pay out up to 6,000 Ethiopian birr ($300) for a cow, 10,000 birr ($500) for a camel, and 800 birr ($40) for a sheep or goat annually. Pastoralists pay premiums averaging about 7.5 percent of the value of the maximum payout.

If forage levels become scarce compared to the index based on the historical satellite data, the herder receives compensation, even if no livestock have been lost.

In response to poor forage conditions, OIC made its first payout to all the insured holders, totalling 570,000 birr ($28,300), at the beginning of November this year at a ceremony in Yabelo, a town 565 km (353 miles) south of the capital, Addis Ababa.

Mude said that although livestock is the key productive asset and source of income for pastoralists, the novelty of insurance in this remote region initially made it difficult to sell.

ILRI spent two years researching the needs of the Borena zone herders before formally launching the insurance.

A further challenge is how to assess the damage suffered by policyholders when dealing with a mobile population.

Mude explained that an important feature of the insurance is that pastoralists remain covered even if they migrate out of the woredas (districts) where they are insured, since migration itself implies that there is a severe lack of forage. Compensation is therefore calculated based on the area where they were initially insured.

Wondimu Beteyo, a pastoralist who received a payout for his cattle and goats, says that until recently he had to trek several days for pasture and water. Now, he says, the money he has received will allow him to replenish the cattle he lost during the recent drought.

Dono Kotelo, from Teltale woreda, insured his two goats and two cattle for a total of 1,048 birr ($50) after learning about the insurance scheme. Although none of his animals died, because he migrated to find pasture, he received a payout of 192 birr ($10) for costs associated with the dry season and said he plans to buy insurance again for the coming year.


Getaneh Eerena, a livestock insurance officer at the micro-insurance department of OIC, said that in the long run the programme is not just about financial payments but about avoiding conflicts.

“The area tends to have high conflict incidence, both within (the) pastoralist community and against agricultural communities,” Eerena said.

Kotelo, the herder, said his Borena community used to cross into the land of agricultural communities when their own pastures were exhausted, often leading to deadly clashes.

Mude and Eerena said their organisations planned to extend the insurance scheme eventually across the country.

(Reporting By E.G. Woldegebriel; editing by Laurie Goering)

Source: Thomson Reuters Foundation

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The Role of Peer-to-Peer Lending in Financial Inclusion

Peer-to-peer (P2P) lending is on the rise – as evident by the hundreds of articles on the subject that have sprung up just this year. However, P2P, generally defined as individuals bringing together small sums of money to lend to other individuals, is hardly a new concept. Moreover, this process of lending amongst communities of small businesses and friends has been moving online for a decade now. And while money is now most commonly transferred between strangers, interconnectivity online has allowed the process to feel almost as intimate as lending among friends and family.

The two earliest entrants into the P2P industry have gained steady followings since their beginnings in 2005: Zopa, a large commercial P2P platform in the U.K. boasts high returns and low interest rates for participants; the U.S. non-profit Kiva facilitates philanthropic P2P lending, wherein microentrepreneur clients of “field partners” or local financial institutions in developing countries are paired with those willing to lend at a zero percent return (i.e. indirect P2P). Through nearly a decade of innovations and new players emerging, P2P has slowly become a disruptive force. Total origination remains moderate with some $2.4 billion originated through P2P in the U.S. last year, but growth has recently skyrocketed.The U.S. market is estimated to swell to$32 billion by 2016. By 2025, the global figure could be as much as one trillion.*

Why such fast growth?

The appeal of online lending is two-fold. First, humanizing the lending process draws on a public sense of community. Many people prefer supporting others in a transparent system of lending as opposed to relying on traditional investing and/or saving options offered by banks. Some borrowers say that knowing other individuals are on the hook, rather than a bank, has incentivized them to go the extra mile in making repayments. In this way, P2P is almost strikingly traditional in that it integrates elements of “group pressure”– a successful innovation in microfinance organizations throughout the world – into the lending process.

Second, P2P lending is often a cheaper form of lending. Online transactions mean little need for brick-and-mortar establishments. P2P lending in the West has developed advanced credit evaluation analytics, lowering default risk and, by extension, reducing costs further. The result is better returns and lower interest rates for most investors and borrowers. Consequently, existing borrowers and small and medium-sized enterprises have come in droves to refinance their debts via P2P platforms.

Rishabh Khosla of Accion’s Venture lab sees other innovations taking shape. One of these is “affinity based lending,” or lending amongst those of a particular group. At StreetShares, a U.S. P2P platform that targets veteran groups and veteran businesses, borrower and investor acquisition has taken on a new grassroots quality. Khosla notes that “The key to vastly lowering the cost and making this market happen is low-cost borrower acquisition, low-cost lender acquisition, and then a really good engine in the middle to assess and underwrite these borrowers.”

P2P lending is pushing financing toward greater credit accessibility in myriad ways. When defined broadly, financial inclusion has already felt the positive effects of P2P lending’s development. Credit for small businesses means economic growth, entrepreneur support, and potentially more employment. Consumers trapped into exploitative interest payments on credit card debt can find some reprieve with P2P refinancing. High-achieving students and P2P lenders are proving to be an especially attractive combination. Many borrowers voice their satisfaction with the entire process.

“Last-mile” borrowers are being affected as well, albeit at a slower pace. A reflection of the unique challenges in reaching poorer regions, a different sort of P2P business model has taken root in the developing world. Partnerships, such as Kiva’s, between microfinance institutions (borrower acquisition) and P2P portals (lender acquisition) have given a new swath of rural borrowers access to credit. Over-indebtedness caused by high interest rates and poor individual credit evaluation remains a concern. However, supporting the better-performing, lower-risk microfinance companies means formal loans are being made available, an attractive option to those who might otherwise resort to loan sharks.

In developing and developed markets alike, potential for high returns has attracted institutional investors who now see the industry as better-developed and less risky compared to its earlier years. As a result, institutional big money is pouring into the industry (both in the form of equity investments into platforms and total loan origination by them), adding to the rapid growth of P2P lending. China, home to the largest P2P market, serves as a good example: total loan origination via Chinese P2P companies has grown more than 200 percent in 2014.** This marks a global trend. With so many large investment firms getting involved, the industry looks distinctively more commercial.

But perhaps social and commercial interests stand to benefit from one another. A P2P industry with more visibility, even if primarily profit-driven, could benefit a whole range of P2P lending companies, from the philanthropic to the bank-like. After all, both types of platforms aim to improve on and fill gaps in current lending practices. The fact remains, however, that growing interest is moving the industry closer to institutional players. P2P companies and their business models may very well be absorbed by banks as part of a new age of efficient banking. What this would mean for P2P lending is unclear, but many are understandably wary of trusting big business to champion fair lending practices.

Regardless, authorities are clamoring to work out regulations for the nascent industry as P2P companies scale up. During this stage of rapid change in P2P lending, it will remain essential to keep track of where the industry is going and how best to try to shape it. Accordingly, Planet Finance will address some of the pressing topics in our upcoming research on P2P lending practices worldwide. The research comes as part of our Microfinance Robustness Program which promotes the sustainability of the microfinance sector and is supported by Credit Suisse, a partner of both Planet Finance and the Center for Financial Inclusion.

By exploring impacts of P2P lending in different communities and evaluating the potential it holds for extending financial inclusion, we hope to illuminate a socially minded narrative, one that discusses innovative bank to P2P company partnerships, and address concerns of P2P lending fueling over-indebtedness.There is currently a need to better define the P2P lending space, to better understand the complexities and risks of various business models, and to provide a more involved discussion of how the industry is progressing. Both the unfairly served and “underbanked” alike will ultimately benefit.

* Estimates from Research and Markets distributed report “Peer-to-Peer Lending: Global Facts and Figures 2014”

**Estimates from, a China P2P market monitoring website



Financial Inclusion through Savings and Village Enterprises (FINISAVE)

Financial inclusion has become a contributing factor to the achievement of the Millennium Development Goals (MDGs), particularly MDG1, which promises to eradicate extreme poverty and hunger. The MDGs also include a gender-specific target for achieving full and productive employment and decent work for all. MDG3 is aimed at promoting gender equality and empowering women, and includes a specific reference to women’s economic empowerment. Globally, women account for 66% of the labour force and have played a major part in the growth of small businesses. Women entrepreneurs, in particular, are contributing significantly to economic growth by creating jobs and generating revenues. Yet, women-owned businesses’ access to credit remains difficult.

In rural areas of Africa, women constitute the largest percentage, 70% of the rural labour force that derives their livelihood from subsistence agriculture. A large number of these farmers aspire to employing better production techniques that can lead to increased output. However, they are dealing with challenges of access to capital that would enable them re-invest their businesses. Only thirteen per cent (13%) of rural people obtain loans from banks for re-investing in agricultural production. This lack ofaccess to finance for the poor, particularly for rural women is attributable to a number of factors including, the location of their businesses and banks’ perception of agricultural lending as risky business. Currently, there a few products for agricultural lending tailored to suit women’s needs and to couple this, the lending criteria employed by banks is complicated for women. Moreover, the reality in most African countries is that women lack access to and control of land, which serves as collateral for bank loans. There exists also a fear by women to walk into banks and/or financial institutions due to the language barrier. The list can be endless: Mobility restrictions due to the geographic spread of homes across large areas; low levels of education and business training that hampers skills in record keeping, business plan preparation and general management of the business. All of these barriers affect the performance, growth and sustainability of women’s enterprises.

In addition to these barriers, the New Faces New Voices (NFNV) Uganda Chapter, a Graca Machel Initiative, identified specific gaps for rural women in terms of access to finance including: little or no formal education, inadequate training on formal financial literacy, women being perceived as housekeepers and not fit to participate in economic activities and poor infrastructure in rural areas.

Against this backdrop, and in an effort to address the challenges of women’s access to finance in rural areas, NFNV Uganda Chapter, in partnership with the Uganda National Entrepreneurship Development Institute (UNEDI) began implementing a Financial Inclusion model through the Savings and Villages Enterprises (FINISAVE), a financial cooperative model aimed at increasing the availability and size of finance in remote areas. The FINISAVE Model is based on two schools of thought: (i) People do earn some income but need to be guided on responsible spending and on investments that fall within their income; and (ii) collectively pooling resources together for improved household incomes while working hard on key productive value chains. The FINISAVE model was pilot tested in Lwengo District, with more than 125,000 women entrepreneurs, and a total of 250,000 men and women in 465 villages benefitted from this initiative.

We noted the following during implementation: (i) The sharing of costs through a public-private-civil society partnership has assisted in addressing the lack of infrastructure in women accessing financial institutions in rural areas; (ii) through the formation of savings and investment village based groups that is linked to a commercial bank via mobile banking, women in rural areas are able to work in profitable and sustainable investment cooperatives; (iii) the model underscores a paradigm shift in the cultural and traditional beliefs that a woman is a mere house labourer. This was done through a high-level business and financial literacy training programme, which encouraged communities to move towards self-discovery, a mind-set change, enabling a woman to identify opportunities around her. These women, who had previously not seen the inside of the bank, can now confidently walk into a bank with clear knowledge of the banking services, products and their rights as consumers.

Looking forward and from what we have learnt from this process, regulatory authorities and financial institutions should:

regulate agent banking services shifting from a corporate culture to a pro-poor service delivery that is context specific;
create rural women guarantee and production material subsidy funds;
embrace and highly promote the policy of public-private civil society partnerships in financial service delivery;
design products that can be accessed by all categories of the female clients especially those at the lowest financial strata;
build capacity to serve women as a special segment by developing new finance models specifically geared towards increasing access to finance. The proposed initiatives should address the gendered factors that constrain the growth and sustainability of rural women’s businesses.
There must be a mind-set change and paradigm shift that the rural populace are merely recipients of corporate responsibility to financial institutions and that poverty is part of the package for rural communities in Africa. This will be a missed opportunity, as the rural populace are credible, vital contributors to the economies in Africa.
By: Theopista Ntale Sekitto


App to hook up farmers with buyers

The International Fertiliser Development Corporation has launched a software to help connect farmers with agriculture enterprises for purposes of enhancing production and marketing.

According to the entity’s agribusiness clusters adviser for Kenya, Mr Peter Kirimi, the system, E-Prod, is designed for enterprises working with large number of farmers for purposes of monitoring deliveries, enabling timely payments, ensuring accurate record keeping and tracking production patterns of different producers.

“E-Prod in itself is an innovation that can be used even by the smallest agribusiness,” Mr Kirimi told the Nation after the launch of the application in Nairobi yesterday.

The programme is part of the organisation’s 2Scale agribusiness project, which started in 2012 to help farmers boost their bargaining power, especially when dealing with large-scale buyers.

The application, which has been on pilot basis since 2013, is being used by firms such as Malindi-based Equator Kenya Limited to manage its producer organisations.

“Using E-Prod, an administrator can handle transactions for more than 5,000 farmers. This is a huge saving in time and staff costs,” said Almut van Casteren, a director of Equator Kenya.

A plant manager at Eldoville Dairies, Mr Andrew Waithaka, says the company uses the system to track how milk farmers perform.

“It takes less than 15 minutes to enter all production data for a group of 150 farmers,” Mr Waithaka noted.

In Summary: According to the entity’s agribusiness clusters adviser for Kenya, Mr Peter Kirimi, the system, E-Prod, is designed for enterprises working with large number of farmers for purposes of monitoring deliveries, enabling timely payments, ensuring accurate record keeping and tracking production patterns of different producers.



New financing agreement to strengthen rural finance services in Uganda

IFAD invests in rural communities to create vibrant rural economy

Rome,  – On 24 November 2014 the government of the Republic of Uganda and the International Fund for Agricultural Development (IFAD) signed a US$29 million loan agreement to finance the Project for Financial Inclusion in Rural Areas (PROFIRA). This project aims to sustainably increase access to and use of financial services by rural populations in Uganda.

With a total cost of $36.6 million, the project is cofinanced with $4.9 million contribution from the Government of Uganda and $1.4 million contribution from the beneficiaries themselves. The financing agreement was signed today in Rome by Grace Dinah Akello, Ambassador and Permanent Representative of Uganda, and by Michel Mordasini, Vice-President of IFAD.

“The supply of financial services to rural areas in Uganda is still very limited, falling significantly short of demand,” said Mordasiniduring the signing ceremony. “In these areas, community-based savings and credit groups are the only financial intermediaries responding to financial services demands of the rural people. The financing agreement we are signing today is tangible evidence of our ongoing joint collaboration with the Government of Uganda to alleviate poverty.”

PROFIRA is designed to help 576,000 financially excluded rural households, particularly women and young people, to improve their economic activities and livelihoods. It will also expand and improve the communities’ access to financial services aiming to increase loans and savings resources available to and used by members.

Agriculture is a primary source of livelihoods for the project’s beneficiaries. Consequently, the project will focus on increasing agricultural income through enhanced use of improved inputs and other means of production. PROFIRA will also contribute to increase agricultural related trade and commerce and provide opportunities for greater engagement in agricultural processing.
The project will be managed by Uganda’s Ministry of Finance, Planning and Economic Development through its Microfinance Department. By the end of this seven-year project, it is expected that the project will help increase the income of the project participants, improve food and nutrition security and reduce vulnerability of the rural communities of the country.
Since 1982, IFAD has invested a total of $325.5 million in 15 programmes and projects in Uganda, amounting to $1.3 billion when cofinancing is included. It is estimated nearly 5 million Ugandan rural households have benefitted from these investments.


Rural Finance for Small Farmers: An Integrated Approach

This paper provides an introduction to the key elements of success in the expansion of micro lending to rural areas. The production that may impact clients’ repayment capacity. The next section outlines the steps an institution must take to expand responsively and sustainably into rural markets. first section identifies the common risks in agricultural.

Click here to download the document

PROFIRA Vacancies Announcement

The Government of Uganda (GOU), represented by the Ministry of Finance, Planning and Economic Development (MoFPED), with the support of International Fund for Agricultural Development (IFAD) have jointly designed the Project for Financial Inclusion in Rural Areas – PROFIRA. This is a seven years project funded through a loan extended to Government by IFAD. The overall goal of PROFIRA is to contribute to Governments effort to increase incomes, improve food security and reduce vulnerability in rural areas. The development objective is to substantially increase access to, and usage of financial services by the rural poor population. PROFIRA aims to achieve its goal and objective through the implementation of three components: (a) SACCO Strengthening and Sustainability (b) Community Based Financial Services CSCGs and (c) Support toward the establishment of Policy and Institutional Support.

The Ministry of Finance, Planning and Economic Development (MoFPED) hereby invites suitable candidates to fill the following available positions under PROFIRA.


Vacancy Announcement for Rural Finance Officer – AFRACA

Africa Rural and Agricultural Credit Association (AFRACA) located in Kenya and a regional non-governmental organization established through a country Headquarters agreement signed with the Government of Kenya is recruiting a Rural Finance Officer for its Rural Finance Knowledge Management Partnership III (KMP III) project. KMP is rural finance knowledge management IFAD-funded grant programme that started operations in 2003. KMP targets IFAD programmes in East and Southern Africa (ESA). In collaboration with other partners’, KMP phase III has three components mainly: (i) Programme support & learning which provides capacity building and knowledge management support to IFAD-supported rural finance initiatives. (ii) Action-based research partnership which is pursued a partnership, African Economic Research Consortium (AERC). (iii) Knowledge and Information Partnership which aims to develop a virtual website for the increasingly commercialized agricultural sector and the needs of the financial institutions in Africa.

Applications are invited from suitably qualified and interested persons on this fulltime position of Rural Finance Officer to be based at the KMP office at the Shelter Afrique Building Mamlaka Road, Nairobi.

Vacancy Annoucement Rural Finance Officer – AFRACA

Vacancy Announcement Project Manager – PICO KN

PICO Knowledge Net Limited (PICO K-NET), a Kenyan company limited by liability wishes to recruit a Project Manager to manager its IFAD funded knowledge management (KM) initiative, IFADAfrica. IFADAfrica is an IFAD grant funded project which aims at strengthening knowledge management and learning at project and country programme levels in Eastern and Southern Africa Division. The overall purpose is to improve project management processes by fully integrating knowledge management into all aspects of project management, including M&E, financial management, supervision and reporting.
Applications are invited from suitably qualified and interested persons on this fulltime position of Project Manager to be based at the IFADAfrica office at the Shelter Afrique Building Mamlaka Road, Nairobi.

Vacancy Announcement Project Manager – PICO KN

Seven Guidelines for Measuring Impact Investing

The impact investing space is growing and benefitting an increasingly diverse array of areas including financial services, agriculture, healthcare, housing, energy, and more. Expanding too is the number of impact investing organizations incorporating impact measurement as part of their investment activities. As more players enter and the industry matures it’s even more important that the industry embraces the capture of impact data and assessment of progress against stated goals. This information validates the industry, helps investors manage investee companies, and improves investor and investee strategic decision-making. It also positions the industry to convince funders, especially new ones, to mobilize additional capital.

Last year the G8 created the Impact Measurement Working Group as part of its Social Impact Investing Taskforce. A few weeks ago the group released its “Measuring Impact” report, which includes seven guidelines for impact measurement and five case studies of how investing organizations have put the guidelines to good use. The initiative by the G8 reflects an elevated priority and the development of the industry.

The seven guidelines are adaptable across contexts and align with industry best practices, such as the European Standard for Social Impact Measurement. The report, guidelines, and case studies were developed through a six month research and consultative process which included a review of 60 industry publications and interviews with 45 experts and practitioners in impact measurement. Here are the guidelines with supporting information from the case studies.

Set Goals: Articulate the difference you seek to make. Clear, measurable goals define investor intent, guide action, and create a reference point for judging progress. Goals should link closely to the investor’s investment thesis or theory of value creation.

Bridges Ventures, a fund manager investing in education, transport, and health in the U.K. and U.S. co-develops impact goals with its investees. Bridge has four outcome themes (education and skills, health and well-being, sustainable living, and underserved markets), and each of its funds is designed to achieve specific impact objectives that align with one or more of them. These objectives help determine which impact indicators are employed. Bridge works with investees, including via collaborative workshops, to develop impact goals, and incorporate related indicators.

Develop Framework & Select Metrics: Determine what metrics you will be holding yourself accountable against. Crafting an effective framework with corresponding metrics will outline which data will be collected. Frameworks should include the logic of how data will be applied to the portfolio and should consider the needs of all stakeholders involved.

In 2013, the New York State government launched a Social Impact Bond to improve employment and reduce recidivism among high-risk, formerly incarcerated men. The metrics, developed with assistance from the law firm Jones Day and the Harvard Kennedy School, measured progress against: the average number of days incarcerated per person during the observation period; income in the fourth quarter following release from prison; and the number who started a transitional job during the observation period. The impact of the intervention is calculated using a randomly controlled trial (RCT).

Collect & Store Data: Collect and store the data you need to determine your progress. Best practices in data collection and management lead to improved data integrity, the ability to measure progress, and low reporting burdens. Planning data collection and management requires considerations for all parts of the data ecosystem – information technology, tools, resources, human capital, methods used to obtain and keep track of data, etc.

Investisseurs & Partenaires (I&P) invests in SMEs in 14 countries across Africa. I&P works with investees to put in place “sound ESG and impact data management procedures,” with an emphasis on reliable data collection and storage. Investees report impact data on an annual basis.

Validate Data: Validate that the data you collected is of sufficient quality. Data should be presented in such a comprehensive and digestible way that calculations can be checked and processes reviewed.

Oikocredit, based in the Netherlands and investing in microfinance globally, validates impact data at multiple levels. Regional managers validate country data before it is sent to the global office, which then validates the data again before it is approved for analysis. Ensuring that data is sound is needed to assess individual investments as well as portfolio performance. Oikocredit has also obtained third-party impact data validations, by M-Cril in 2009 and Planet Rating in 2013.

Analyze Data: Distill insights from the data you collected. Strong data analysis and findings can have a big role in steering investment decisions and determining how capital is allocated. Conducting analysis using standardized, objective processes helps findings be widely understood and actionable.

One Acre Fund supports small-scale farmers in East Africa by offering inputs, flexible financing and agricultural training. The impact goal of One Acre’s support is an increase in annual profit of $135 per farmer. One Acre analyzes results against this mark and also studies the data across districts, crop types, and countries to better understand agricultural dynamics and success factors.

Report Data: Share your progress with your key constituents. Progress reports should be evidence-based. Helping stakeholders understand progress and engage with an organization’s activities supports every step of impact investing.

Oikocredit provides performance reports, webinars, and workshops to its partners. The group also has a new dashboard and produces an annual Social Performance Report that shares aggregate partner performance against key metrics.

Make Data-Driven Investment Management Decisions: Identify and implement ways to strengthen your investments and operations. Incorporating data analysis findings as well as stakeholder feedback and recommendations on data can be a source for continuous improvement.

I&P conducts seminars twice a year with its investment teams where impact data and its implications for strategy and practices is discussed. Insights from these seminars might enable investees to achieve greater impact from their work and improve measurement approaches. They may guide I&P in seeking new investment opportunities that will further impact goals.