Crop ins key to sustainable farming

Towhidul Islam, a marginal farmer in Godagari municipal area under Rajshahi, lost almost all his Aman crop in 2023 due to excessive rainfall from mid-October to early November.

He got only five maunds of paddy against his expectation of 25 maunds. But, he did not consume the rice for having black rust on it.

Mr Islam not only lost the rice he needed for feeding his five-member family, but also money worth Tk 200,000 invested to cultivate 15 bighas of land.

Around five years back, he was involved with a weather-index-based crop insurance scheme and at that time any loss due to unpredictable weather used to be compensated by the insurer.

The insurance scheme was piloted by the state-owned Sadharan Bima Corporation (SBC) and funded by the Manila-based Asian Development Bank (ADB).

This project's fund originally came from the Japan Fund for Poverty Reduction however chosen as one of the best projects of the ADB in South Asia.

Mr Islam, 36, is now depressed because of loans taken from local micro-financiers or NGOs.

"I'm now struggling to cultivate Boro paddy as I have no money," he said in a pessimistic note.

Mr Islam is one of over 16.8-million farming households or 47.5 per cent of total holdings in Bangladesh whose crops remain uninsured amidst adverse weather in recent years.

Bangladesh is an agrarian economy with more than 37 per cent of people farming, thereby contributing to the GDP by more than 11.3 per cent.

Global warming is making extreme weather events in the country such as storms, floods, droughts and thundershowers. And such events impact cereals and other crops. Consequently, macroeconomic indicators, for example, inflation, worsen. It may fail to achieve food security for farming households and poverty may rise.

The ADB project grant aimed to develop and implement weather index-based crop insurance as an adoption tool to reduce climate variability and extreme weather in Bangladesh. It was a four-year project beginning in 2015.

The above picture of Mr Islam shows the importance of such insurance system on regular products for ensuring sustainable growth in agriculture, reducing poverty and maintaining macro-financial stability.

But, the reality is that it did not take place. Why?

When several people were involved with the project until June 2018, they said the government has yet to decide to provide subsidies associated with crop insurance products.

Besides, the Ministry of Agriculture was not interested in such an insurance system.

Project director of Weather Index-Based Crop Insurance Pilot Project Wasiful Huq giving chaims in Sirajganj in 2017

"Ministry of Agriculture people do not prefer such insurance," said a former senior official at the Ministry of Finance on condition of anonymity. He was the boss of the project at the ministry then.

The official did not say why the agriculture ministry opposed, adding: "They sometimes argued that insurers do not settle claims."

They also argued that the ministry does provide huge subsidies on the country's agriculture. Immediate-past Agriculture Minister Dr M Abdur Razzaque told the Parliament in June in 2023 that the government provided over Tk 978.7 billion in subsidies on agriculture in the last 13 years or a yearly average worth Tk 75.3 billion.

Anup Kumar Chatterjee, an ADB financial specialist in Dhaka during the project period told the FE, that crop insurance is vital to agricultural sectors of South Asian countries, including Bangladesh.

"It serves as a financial safety net, protecting farmers against losses caused by various climate and weather-related threats that can adversely affect crops."

The provision of premium subsidies is a sensitive issue. "Governments can use premium subsidies to promote private-sector agricultural insurance to replace ad-hoc disaster relief."

India's main crop insurance scheme is the Pradhan Mantri Fasal Bima Yojana (PMFBY), a multiple-peril yield-based crop insurance programme.

A majority of PMFBY premiums are subsidised by central and state government payments to insurers to ensure modest premium rates are charged to farmers, Mr Chatterjee told the FE through email communications.

A renowned economist of Bangladesh, Dr Ahsan H Mansur, told the FE that the agriculture ministry's arguments are not right as the existing subsidy is for ensuring production, and the insurance subsidy is to mitigate the risks of production losses.

"To my mind, this subsidy should be given," he said. But he suggested improving flood management as well as innovating adaption tools to fight natural calamities which ultimately help shrink the volume of subsidies.

There were a few more initiatives from the developing partners after the end of the crop insurance project.

The Swiss Contact conducted a project through two non-life insurers - the SBC and the Green Delta Insurance Company, a privately-owned non-life insurer.

This project engaged Basel-based Syngenta AG office in Bangladesh to sell insurance products.

"I've attended some meetings, including the World Bank's latest proposal on coastal area crop insurance, but in every case, representatives from the agriculture ministry oppose," said a senior official at the insurance regulator - IDRA on condition of anonymity.

He said there is no regular such products right now in Bangladesh despite the fact that the regulator has mentioned it in its latest bancassurance guideline.

Ms Wahida Akter, secretary at the agriculture ministry, could not be contacted despite repeated attempts for her comments.

Mr Md Wasiful Huq, who was project director of the weather-index-based crop insurance in Bangladesh, told the FE in his wrapping-up report that they had suggested introducing such an insurance system as regular insurance products.

"From our field experience, we recommended making the products as like as other insurance products, both for private and public insurers," Mr Huq told the FE recently in an interview.

The four-year project sold crop insurance policies to nearly 10,000 farmers in three districts - Rajshahi, Sirajganj and Noakhali.

It received total premiums worth Tk 5.2 million and compensated Tk 6.5 million to the farmers. There were losses worth Tk 1.3 million.

However, the products sold for paddy and potato crops were not actuarial products, according to SBC officials who were involved with the project.

Once it was actuarial products, the rate of premiums might have been increased. However, the SBC also did not re-insure the premiums to the re-insurance companies.

Once there were reinsurance arrangements, the loss money came from the re-insurers.

Such plans now depend on weather data either from insurer's own weather stations or satellites so there is no scope for denial of claims.

If the temperature becomes high that affects the flowers and crops, farmers cannot identify but the data can prove the damages.

In the meantime, there was crop insurance and livestock insurance in Bangladesh, introduced in 1977 by Sadharan Bima Corporation (SBC), but it was discontinued as many irregularities were found and financial losses for the SBC.

The crop insurance was not weather index-based, according to the SBC people.

It was traditional crop insurance products and once crop losses the inspectors used to visit the field to assess the damages.

It was alleged that the inspection reports were biased and inadequately planned, they said.

[email protected]