ADB tells govt to roll out nationwide agri-insurance

The Asian Development Bank has called for government investment to scale up sustainable agriculture insurance in Bangladesh.

"The agriculture insurance market is underdeveloped and the government should enact a policy to help the sector to mature," Manmohan Parkash, country director of ADB, said at a seminar.

Parkash made a set of recommendations at the seminar styled "Financial protection towards agriculture risk mitigation in Bangladesh" held yesterday at the capital's Radisson Blu Dhaka Water Garden hotel.

The recommendations were made based on the experience of the pilot project 'Weather Index-based Crop Insurance' funded mostly by the Manila-based multilateral lender and run by Sadharan Bima Corporation.

Crop insurance is an insurance package designed for farmers to protect them from crop losses due to natural disasters such as hail, drought, floods and so on.

Farmers in Bangladesh are more vulnerable to the vagaries of weather than most due to climate change making the country highly susceptible to the increasing monsoon floods and tropical cyclones.

But they cannot protect themselves against the devastating climatic events because traditional insurers have been unable to come up with suitable crop insurance schemes.

The ADB-administered programme allows a farmer to claim compensation from his/her insurer when certain climatic trigger points are hit, such as cyclone or tropical storm in a given area hits a specified magnitude or when rainfall rises above or drops a certain level.

Having this kind of cover would give farmers the ability to continue to plan and save for the longer term even if their harvests are suddenly and arbitrarily destroyed by bad weather, the ADB said.

A new weather index in conjunction with the Bangladesh Meteorological Department was generated using weather data for the past 25-30 years.

A total of 12,000 small farmers came under insurance coverage against the target of 6,000.

The ADB provided a grant of $2 million to run the pilot project in three districts: drought-prone Rajshahi, flood-prone Sirajgonj and cyclone-prone Noakhali. Some 20 automated weather observation machines were installed on the roofs of different upazila parishad buildings.

"The feedback from the pilot project is very encouraging," Parkash said.

A partnership between the public and private sectors is needed to make agri insurance less expensive to farmers.

The financial sector policymakers should acknowledge that agriculture insurance is a useful instrument to transfer financial risk away from the farmer, he said.

Parkash went on to advise financial institutions to introduce agriculture insurance tagged with farm credit to encourage farmers to take insurance coverage.

He also emphasised on adoption of technology for agriculture insurance to get early warnings, which will enable farmers to avoid weather risks.

Sadharan Bima collected a total of Tk 51.36 lakh as premium from farmers. Of the sum, subsidy from the ADB and government was Tk 21.97 lakh, according to a presentation made at the seminar.

So far, insurance claims amounting to Tk 53.46 lakh were settled under the project.

The pilot, which began in March 2014, will end on June 30.

"Crop insurance is popular in neighbouring India," said Md Safiqur Rahman Patwari, chairman of the Insurance Development and Regulatory Authority.

But despite being an agro-based country, it is yet to be introduced in Bangladesh.

"Climate change has intensified natural hazards and disasters, posing huge threats for the agriculture sector. So, it is high time that agriculture insurance is embraced to reduce farming losses."

Sadharan Bima organised the two-day seminar.