International Finance Corporation (IFC) and Green Delta Insurance Company Ltd yesterday entered into an agreement to develop insurance products for farmers to protect them from weather-related losses.

Advisory support will be provided for distributing the products, increasing lending to farmers and improving their risk profile.

Kyle F Kelhofer, country manager of IFC, and Farzana Chowdhury, managing director of Green Delta, signed the agreement on behalf of their respective organisations, according to a statement.

 “Crop insurance will protect rural economy. Weather-index insurance will help regulate farmers' income and infuse reliability to this uncertain sector,” Chowdhury said.

The agriculture sector accounts for 20 percent of the country's gross domestic product and employs close to half the labour force. However, the sector is vulnerable to frequent natural disasters that cause serious damage to crops and livestock each year.

Banks and other financial institutions are unwilling to extend credit to the sector exposed to natural disasters without risk-mitigating measures.

“Through the index-based insurance, IFC will help provide a safety net to agribusiness and offer a range of financial services to farmers aimed at securing their livelihoods,” said Kelhofer.

The project is partly funded by IFC's Global Index Insurance Facility, a multi-donor trust fund supporting development and growth of local markets for weather and disaster index insurance.

Donors include the Netherlands, the European Union, and Japan. Bangladesh's pilot programme for climate resilience project also provides funds.

Nasir A Choudhury, adviser of Green Delta, was also present at the deal signing ceremony.