Crop insurance, best understood in its unmistakable link with the uncertainty of cultivation and unpredictable harvest, is yet to figure as a possible way out for farmers in this country. Because of the vulnerabilities that often characterise farm cultivation in this part of the world, insuring crops against misfortunes from natural calamities was not easy to get going. Against this backdrop, it is indeed heartening to note that lately insurance firms-both public and private-are at work on running pilot projects on what is called weather index-based crop insurance (WIBCI). The WIBCI is an adaptation tool to reduce the risk of climate variability and extreme weather vulnerability in the agriculture sector.
That crop insurance has, of late, found its long expected space in the country's insurance sector may be a watershed in its agricultural sector. The situation of risks associated with crop cultivation is common to many countries in Asia and Africa, and hence exposure to uninsured risks is a major cause of low yields, slow growth and persistent poverty. Weather related risks are hugely important for poor people in most developing countries as an estimated two-thirds of them depend on agriculture and natural resources for their well-being, says a World Bank report. This includes not only farmers whose income and consumption directly depend on agriculture, but also residents of rural areas whose employment and business incomes directly or indirectly depend on successful agricultural outcomes. Uninsured weather shocks also affect farm workers, input suppliers, entrepreneurs and workers in agribusiness, and providers of non-tradable goods and services in the rural non-farm economy.
As mentioned above, the weather index-based crop insurance is currently being examined through pilot projects in the country. One of the projects is run by state-owned insurer Shadharan Bima in collaboration with the Bangladesh Meteorological Department (BMD) and another by the private insurer Green Delta. As per terms of WIBCI, a farmer is entitled to claim compensation from his/her insurer when certain climatic trigger points are hit, like when cyclone or tropical storm in a given area hits a specified magnitude or when rainfall rises above or drops to a certain level. No doubt, 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 damaged by bad weather. Understandably enough, this being the starter, the initiative is likely to be geared up with support from all stakeholders in the near future.
According to experts, weather index-based insurance is a major institutional innovation that could revolutionise access to formal insurance for millions of small farmers and related people. It has been introduced in pilot or experimental form in many countries. Significant efforts have been made in research to assess its impacts on shock-coping and risk management, and to contribute to improvements in design and implementation.
WIBCI products have been tested and applied across Asia and Africa with varying degrees of success, as a mechanism to improve livelihood security by enabling vulnerable populations to transfer risks associated with climate change, extreme weather events and other hazards. In drought-prone Africa and parts of northern India, index-based agro-insurance coverage is being practised for some time now. But the practice is totally new for our farmers.
In order for the WIBCI to succeed, the need for improved weather forecasting cannot be overemphasised. A recently inked project with the World Bank to modernise the country's meteorological and hydrological information system, including weather forecasting, early warning systems, and delivery of weather and climate services may serve well to encourage crop insurance to gain grounds in the country. However, as crop insurance is new to the country, a good deal of its success will depend on how farmers are motivated and delivery of services is ensured. The country's agro experts do have a proactive role to play by working closely with the meteorologists.
Now that the pilot projects are on and a good deal of future policies and actions depends on the feedbacks of the projects, it is important that these are closely scrutinised in order to take into account every detail, including of course the problem areas, towards rendering crop insurance a viable proposition. What in this regard is important is gathering experience and information from countries with similar crops and comparable weather conditions. India, for example, could be a source of useful information. In India, a crop insurance scheme called National Agriculture Insurance Scheme (NAIS) is being implemented by the Agriculture Insurance Company of India, a state owned company. The scheme is compulsory for all farmers who take agricultural loans from any financial institution. It is voluntary for other farmers.
Success of crop insurance in the country will largely depend on government support that also includes raising awareness among farmers. To start with, it is the state-owned insurer Shadharan Bima that has to initiate programmes to make crop insurance attractive to farmers. However, in course of time there will be the need for specialised insuring firms to deal with crop insurance.
