Yet another move on farm insurance

Bangladesh is a land where weather at times plays foul, taking a heavy toll on the peasantry. Cyclones, accompanied by tidal surges, cause extensive damage to crops, fish and livestock. Drought or lower-than-normal rainfall, though not a regular feature, also affects crop production. But the flood as a natural calamity remains at the top of the list of natural destroyers in this part of the world. The damage caused by a major flood brings untold sufferings to the people, particularly those who live in rural areas the large majority of whom are, directly or indirectly, dependent on agriculture activities.

The Bangladesh farmers are acclaimed world over for their resilience in the face of frequent onslaughts by natural disasters. With meagre help from the government or without it, the rural people piece together their life and start anew within a very short time of a disaster. Farmers, in particular, are seen trying their best to recoup their crop losses within the shortest possible time.  But in the process, the debt burden of small and marginal farmers becomes too heavy and invites troubles for them. Unfortunately, there has not been any serious effort to mitigate the sufferings of the affected peasantry through any formal institutional mechanism such as agricultural insurance.

What the policymakers have done so far is that they have explained in public the importance of agricultural insurance in a country which is prone to natural calamities. There was, however, a pilot scheme on crop insurance, launched by the state-owned general insurer, the Shadharan Bima Corporation (SBC). The scheme failed to deliver results. The government reportedly has now decided to introduce a coordinated agriculture insurance system with the help of technical and financial support from the multilateral lender, the World Bank (WB). Introduction of insurance in the country's agricultural sector would not be that easy, mainly because of the lack of awareness among the vast majority of farmers who are not adequately educated and resourceful.

It will be important to raise an appropriate level of awareness among the rural population about the benefits of farm insurance. Since visits by natural calamities remain uncertain, farmers are unlikely to be interested to take up insurance policies. However, provision for government subsidy might help make the farm insurance policies popular. Besides, the corporate sector could also prove themselves as trendsetters in this regard. A good number of large private groups or companies are now engaged in contract-farming. Taking up insurance policies on behalf of their contract growers could help the process of popularising the concept of insurance.

As the experience of distributing farm credit by the private sector banks shows, the private insurers, who dominate the sector, may not be that interested to get involved in farm insurance. Government subsidy and initiatives on the part of large corporate entities could help the auspicious beginning of the new insurance product that is widely used in most developed and emerging economies. However, the move to introduce it in this country is unlikely to progress much if the government and other relevant agencies remain content with the spending of a few million dollars doled out by multilateral lenders as technical assistance on 'pilot agriculture insurance' scheme.