For Hassan Bashir, a career in insurance was considered not just odd, but un-Islamic, as many imams consider conventional insurance to contain elements of gambling, and not sanctioned under sharia law.
In Bashir’s town of Wajir, near Kenya’s border with Somalia, traditional values are still held sacred – especially by his 80-year-old father, Bashir Mohamed.
Bashir’s father would never touch the money he earned, he told The Economist.
“He did not know anything about insurance,” said Bashir, whose father declined to accept any money, even to go on the haj, the pilgrimage to Mecca. “He just knew it was wrong.”
As a result, Bashir created his own insurance company that complies with Islamic law, Takaful.
It offers mutual or ‘charity insurance,’ where the agent charges a set fee rather than un-Islamic interest. Although it has been difficult persuading herders to purchase insurance, Bashir has worked with local imams and sheikhs and brought in Islamic scholars to make herders more comfortable with the concept.
The greatest challenge faced by herders has been drought, and for Bashir, the greatest challenge was finding the right coverage for animals being raised in some of the harshest landscape on earth.
Enter Kenyan economist, Andrew Mude, of the International Livestock Research Institute in Nairobi, Kenya.
Mude developed an insurance model using satellite images to assess the impact of drought on the vegetation that camels, goats and cows need to survive, with the data allowing for the severity of the drought to be factored into the size of the premium.
For example, if the dry weather causes grazing to drop by at least 15 per cent, the insurer will pay out – thereby the model insures the grass, not the animal.
Bashir will be looking to obtain clients from across northern Kenya and southern Ethiopia to spread the risk adequately – but he does expect Takaful to post losses for at least five years.
