Demonstration of IBLI purchase in Kargi. Photo credit: Chris Barrett

The US Agency for International Development awarded the University of California, Davis-based BASIS Assets and Market Access Innovation Lab a Grand Prize in its Science and Technology Pioneers competition.  The Davis group, in conjunction with partners at Cornell University and the International Livestock Research Institute, was selected for the creation and implementation of a satellite-based insurance product for poor pastoralist households in Ethiopia and Kenya.  During a recent drought that afflicted East Africa, this novel insurance contract cut in half the number of families that had to severely restrict basic food consumption and, or engage in fire sales of assets in order to cope with the drought.

The Grand Prize award included $200,000 that will allow BASIS and its partner to develop new options for scaling-up the insurance contract into new areas and also to adopt the contract to the requirements of Takful, or Islamic mutual insurance, so that these innovative insurance ideas become available to more families across the developing world.

2013 was the first year for the Pioneer prize, which was created by the USAID office of Science and Technology to recognize innovative projects that successfully apply science and technology to achieve development objectives.

The prize winning “Index-based Livestock Insurance” (IBLI) contract uses a satellite-based measure of ground vegetation to get high resolution, quality data on droughts.  BASIS researchers demonstrated that these measures reliably predict livestock mortality for pastoralists households.  When the satellite index predicts livestock mortality beyond a deductible level, payments are made to insured households.  The contract is underwritten and sold by private insurance companies in Ethiopia and Kenya, and also enjoys premium support from the International Finance Corporation, which is part of the World Bank group based in Washington,  D.C.

The University of California Davis’s BASIS Assets and Market Access Innovation Lab is hosted in the department of Agriculture and Resource Economics and directed by Professor Michael Carter.  Through its I4 Index Insurance Innovation Initiative, BASIS provides support for the development and testing of the insurance contract, designed to help the rural poor cope when disaster strikes.  BASIS I4 currently has projects in a dozen developing countries in Africa, Latin America and Asia.  Additional details can be found at http://basis.ucdavis.edu.