Ripple has completed a blockchain-based drought insurance pilot program in Kenya that sought to provide smart contract-enabled relief to hundreds of pastoralists in the country’s Laikipia County. The initiative was part of Ripple Impact’s mission to use blockchain for social good.
The pilot program, launched in April, was carried out in partnership with Mercy Corps Social Venture and donation company DIVA Donate. Ripple tested out a data-backed drought insurance model powered by RLUSD, the firm’s dollar-pegged stablecoin deployed on Ethereum.
According to a recent updates, the tests concluded without triggering any payouts, but the money donated was held for future drought support in RLUSD.
How the drought insurance program worked
The program enrolled 517 pastoralists, 70% of whom were women, living in northern Laikipia, a region frequently affected by unreliable rainfall and vegetation stress.
The model used satellite-derived Normalized Difference Vegetation Index (NDVI) data to assess drought severity in Laikipia County. If vegetation levels fell below pre-defined thresholds by the end of May, when NDVI values are usually at their peak, a payout in RLUSD would be automatically disbursed to participants.
The insurance used smart contracts to automate payouts when certain conditions in the NDVI readings guide were met. Participants receive a full payout if vegetation health drops below an NDVI of 0.55.
A linear scale determined values between 0.55 and 0.61. If the NDVI reads 0.57, beneficiaries would receive approximately 67% of the available funds. As occurred during the current cycle, no payout is issued when NDVI exceeds 0.61.
Laikipia experienced vegetation stress in the years between 2014 to 2019, and in 2022, where residents struggled with months of no forage to feed their livestock. In 2023, the drought was initially manageable between June and July, but scanty rainfall made vegetation health deteriorate from August through October.
However, satellite observations during the pilot period revealed there were favorable vegetation conditions, and there were no payments handed out.
The RLUSD allocated for the pilot will be used for the next high-risk drought period later in the year. Ripple will roll over resources and in preparation for any climate patterns change.
According to the company’s blog announcing the program in April, Ripple’s support helped the project increase its fundraising target to $40,000 to insure 533 pastoralists with $75 each in future drought seasons. That amount was seen as sufficient to sustain a single livestock animal for up to six months, for communities whose livelihoods depend on herding.
According to the National Drought Management Authority (NDMA), 23 counties will continue to face serious drought-related stress, with millions at risk of hunger. NDMA’s report revealed that while 15 counties are in the “normal” phase, eight are on an “alert” level.
“The situation has deteriorated in many counties, though the majority are on a worsening trend,” an NDMA spokesperson said.
RLUSD global market footprint expansion
Ripple’s stablecoin has surpassed a $500 million market capitalization just seven months after its launch, placing it among the top 110 crypto assets globally.
On July 8, the circulating supply of RLUSD passed 501 million tokens, with its market valuation hitting around $501 million, per CoinGecko data.
As reported by Cryptopolitan last Wednesday, Ripple appointed the Bank of New York Mellon to hold the US dollar cash and Treasury bills backing its stablecoin. BNY Mellon, which oversees approximately $52 trillion in assets under administration, will manage the reserves and support liquidity operations for RLUSD.
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This articles is written by : Nermeen Nabil Khear Abdelmalak
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