Adapting to Climate Change: Assessing the World Bank Group ...

CHAPTER 3CLIMATE VARIABILITY3.29 Ongoing studies indicate positive impacts of the project. Impact analyses(Berhane, Hoddinott and others 2011a) found that participants in the public workscomponent of the PSNP experienced 1.5 fewer food-insecure months thannonparticipants in areas not affected by drought. 23 In drought-affected areas, thereduction was 0.93 months. Overall, funding is insufficient to meet defined needs,leading to rationing, despite provisions to set aside reserve funds for severe droughtyears. Over the long term, population pressure could lead, in some areas, to plots thatare too small to be viable.3.30 In Kenya, the World Bank has funded a sequence of three projects under the AridLands Resource Management Project (ALRMP) 24 since 1996. These projects have beenimportant in building up drought early warning systems and coordination mechanismsat the district and national levels. Extensive studies by the International LivestockResearch Institute (ILRI) (Johnson and Wambile 2011) significant institutionalcontributions but only weak evidence of impacts on livelihoods and resilience (seeAppendix D). Against these institutional successes, a forensic audit by the Bank foundthat 29 percent of sampled transactions were questionable. The extent of such fiduciaryissues—which were generic, rather than peculiarly climate or drought-related—remainsa major challenge to addressing persistent food security and reducing livelihoodvulnerability in Kenya.CROP AND LIVESTOCK INSURANCE SCHEMES3.31 Extreme weather events have a serious impact on the rural poor, particularly onfarmers and pastoralists in rainfed areas. In addition to imposing direct losses, climatevariability can dissuade farmers from cultivating profitable but risky cash crops anddeter lenders from extending credit. The situation of herders is particularly dire, sincethe loss of their animals destroys their capital; when herd sizes fall below a particularlevel, pastoralists can fall into a poverty trap (Carter, M. Ikegami and others 2011).3.32 This provides a strong case for using insurance to shift weather risk away fromagricultural households. Carter, Ikegami, and others (2011) find that impliedwillingness to pay for insurance, among Kenyan herders, would be roughly 170-215percent of the actuarially fair price, with the highest benefits accruing to those with thesmallest herds. Experimental evidence suggests that insurance can induce farmers toswitch to riskier but more valuable cash crops (Cole, Giné and others 2011).3.33 But despite the apparent benefits, agricultural insurance is little used. 25Traditional insurance is not well suited to managing agricultural losses in low-incomecountries, because the costs of assessing and verifying losses are high relative to thevalue of assets covered.42