PRESENTATION ABSTRACT: "Altering Poverty Dynamics with Index Insurance in Northern Kenya," by Michael Carter

The Hunger Safety Net Program (HSNP) to be launched in northern Kenya will provide reliable cash transfers to poor households. These cash transfers should improve the capacity of beneficiary households to meet immediate, essential needs and to invest in improving their future prospects (for example, by paying for children's school fees, for health care, for veterinary care or supplemental feed for stressed livestock, etc.). By increasing access to cash, the HSNP may also help stimulate the emergence and growth of non-pastoral commercial enterprises, generating employment, income and other "multiplier" gains to residents of the arid and semi-arid lands (ASAL) of northern Kenya.

If access to funds were the only thing holding back poor households, the HSNP should suffice as a policy instrument for sustainable poverty reduction. But given the considerable risk faced by ASAL households, theory and empirical evidence both suggest that there may be considerable value-added from augmenting HSNP with a Productive Safety Net (PSN) aimed at insuring households' critical assets against catastrophic loss.

We call this augmented program HSNP+, which can have three key effects: Stem the Downward Spiral of Vulnerable Households into Poverty, Stabilizing Pathways from Poverty through Asset Accumulation, Crowd-in Finance for Ancillary Investment and Growth. These three effects provide the basic, pro-poor rationale for PSN as a complement to the HSNP.