Effect of index-based livestock insurance (IBLI) on herd offtake: Evidence from Borena zone-southern Ethiopia

When weather shock strike in agrarian economies, households are often used to offtake, perhaps their productive livestock as major risk coping strategy. However, distressful asset offtake could result difficulties to recover after shock, consequently, the macro economy of a subsistence agriculture dependent country could slows down for longer years. In this paper, we analysed the dynamic effect of the index based livestock insurance on the herd offtake behaviour of herders in Borena zone, southernmost part of Ethiopia using three rounds panel data. Our results using fixed effect model analysis shows that households who purchased index-based livestock insurance coverage are less likely to offtake their herds. Empirically, it is appeared to have positive and significant effect on reducing the herd offtake behaviour of the households. This finding suggests that the coverage can help in reducing fear and worry of the herding households about the possible incidence of covariate herd loss. As a result, distressful herd offtake can be reduced and sustain the household s economic growth. Acknowledgement : We are very thankfull to Index Based Livestock Insurance (IBLI) project consortium members for making available rich panel data which enable us to write this paper. We also like to convey our special esteem to the ILRI for taking the initiative for realising the IBLI project. We gratefully acknowledges the valuable contributions of the financial innovation and rural development program research team members of Chinese Academy of Agricultural Sciences (GSCAAS). We would like to extend our appreciation to the International Association of Agricultural Economists (IAAE) for its continual effort to foster agricultural economics and facilitating information exchanges among scholars.