The Global Shield Financing Facility's Stories of Impact | COP28 Special: Building Financial Resilience of Pastoralists in the Horn of Africa
The Horn of Africa (HoA) is one of the world’s most vulnerable and impoverished regions. Its fragility is underscored by the prevalence of pastoralism and livestock rearing as the primary means of sustenance. These practices contribute to over one-third of the agricultural GDP in most nations and a staggering 80 percent in Djibouti and Somalia. Livestock represents not just a source of prosperity but a fundamental source of livelihood within this region. Yet when droughts strike, pastoralists have few options but to sell their livestock—generally at very low prices.
In August 2022, the World Bank initiated the De-risking, Inclusion, and Value Enhancement of Pastoral Economies in the Horn of Africa (DRIVE) project in Djibouti, Ethiopia, Kenya, and Somalia. Development of this project was driven by the critical requirement for a sustainable drought insurance solution tailored to pastoralists; this need called for a shift toward regional cooperation, enabling nations to pool their risks to the market. The DRIVE project aims to enable the HoA to confront the repercussions of climate change by facilitating access to financial services among HoA residents, including women, marginalized communities, and those most susceptible to vulnerabilities.
Financed by a substantial International Development Association (IDA) allocation of US$327.5 million, which is divided among the four participating countries, the DRIVE project is further bolstered by an additional grant of US$30 million from the Global Risk Financing Facility (GRiF, from which the Global Shield Financing Facility* evolved). This grant is earmarked for co-financing insurance premiums and aims to enhance the project’s efficacy.
DRIVE’s multifaceted approach encompasses a package of financial services in Ethiopia, Kenya, and Somalia. These include livestock insurance, savings mechanisms, and digital payment accounts. The project also conducts financial literacy training, aimed at empowering pastoralists to fully leverage the financial instruments. This approach goes beyond insurance and seeks financial inclusion in a broader sense. The project has also set its sights on forging connections between pastoralists and the agricultural value chain.
DRIVE’s approach is marked by its direct engagement with pastoralists through strong local outreach activities in combination with a digital channel platform to ensure that funds and services reach project participants efficiently. In the first year of sales, the product outperformed expectations by securing around 170,000 insurance policies, thus extending coverage to approximately 1 million pastoralists and their families. Notably, the project incorporated gender considerations from the start, with an explicit view toward closing the HoA’s gender gap in account ownership. Women, who are among the most vulnerable of demographic groups, now account for 57 percent of policyholders.
In light of the HoA’s recent emergence from a protracted drought period, there is a paramount need to develop an insurance product that is economically viable and accessible to those who need it the most. An impact evaluation to assess the project’s effectiveness is expected within calendar year 2023. This is an important activity, since mere monitoring statistics often fall short in elucidating whether the intervention has indeed precipitated discernible changes in behavior and tangible results.
As the DRIVE project has gained traction, neighboring countries like South Sudan and Tanzania have expressed a desire to join the initiative. This momentum has also extended to countries across the broader Sahara region, where the project’s applicability is evident and appealing.
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*The Global Risk Financing Facility's portfolio and programs have been transferred unto the Global Shield Financing Facility for continuation, in addition to new programing to be developed under the Global Shield initiative.