Evaluating the Poverty-Reducing Impact of Index-Based Livestock Insurance in Kenya’s Arid Regions: Evidence from Hadado Sub-County

Abstract

Repeated droughts in Kenya’s arid and semi-arid regions erode livestock assets and perpetuate poverty among pastoralist households. Index-Based Livestock Insurance (IBLI) offers potential for mitigating such risks, yet empirical evidence of poverty reduction remains limited. This study analyzed primary data from 286 households in Wajir County using a Difference-in-Differences (DiD) regression framework to estimate the effect of IBLI on household poverty. The results demonstrate that IBLI participation significantly reduces poverty, with insured households experiencing a 1.35-point decline in the poverty index relative to non-participants (B = −1.350, p = .001). Moreover, the interaction between IBLI and the midline phase indicates an additional reduction (B = −1.253, p = .014), suggesting that program benefits strengthened as coverage expanded and implementation improved. These findings reveal a cumulative impact, where early gains deepen over time with sustained exposure to insurance. The results align with theoretical and empirical literature showing that index insurance protects assets, smooth consumption, and prevents poverty traps. Policy recommendations emphasize awareness creation, affordability, and timely claim settlement to enhance uptake and strengthen IBLI’s role as a social protection mechanism in drought-prone regions.