Insurance is a common way of life for most societies. American farmers are insured for a myriad of potential losses, from drought to flood. Not so with the farmers in Kenya who are predominantly Islam and whose sharia laws do not sanction insurance. Insurance, according to the Islam point of view, is a form of gambling, which is prohibited. Yet, Kenyan farmers have had to suffer through perpetual drought conditions. In 2000, the worse drought in 37 years hit Kenya, plunging more than 4 million people into near starvation. Subsequent years have seen various levels of severity in the country’s drought conditions, with no tangible relief in sight. For cattle farmers, especially, who depend upon the lands for grazing, these conditions have resulted in significant financial losses to an already very weak economic group, as well as herd loss and the subsequent diminishment of the food supply.
It took the determination and tremendous patience of Hassan Bashir to bring insurance protection to a community of Islamic cattle herders. First Hassan had to win over his father, which was no easy matter. He says it took 17 years—this is perseverance! Mr. Bashir is from a Somalian family of cattle farmers. His entry into the insurance business was an unexpected and unwelcome surprise. Bashir had to be creative to come up with an insurance policy strategy that would comply with the regulations of sharia law. He did away with the traditional interest payment, made the insurer an agent and set a flat fee. First step for Mr. Bashir was to insure his community’s cars, businesses and homes, but a priority for him was to do something to help stem the financial losses suffered by cattle farmers due to drought.
It wasn’t easy, because herds typically graze across wide expanses of land by nomadic herders and there had been no insurance model to address such a situation. The International Livestock Research Institute in Nairobi gave him his answer. An economist by the name of Andrew Mude had created an insurance model based on satellite imagery that assesses the impact of drought on the vegetation that cattle and other animals need to survive. Premiums would be based on the severity of the drought. If drought conditions cause more than a 15% diminishment in grazing vegetation, based upon historical records, the insurance company pays out. Under Mude’s model, the vegetation is being insured rather than the cattle.
Convincing cattle herders to pay an insurance premium was no easy matter. Bashir had to also convince local religious leaders, and tribal heads, as well as enlisting the aid of Islamic scholars.
Bashir’s work is far from finished. To be sure the insurance company remains solvent, he needs to recruit customers from across northern Kenya and into Ethiopia so that the risk is spread wide enough that a single drought impacting an area does not result in premium payouts to all the herders at once. Bashir is not expecting a profit anytime soon. But for him, it is also work of the heart, as he has seen the losses of his community, the devastation to his people and wants to help.