The Bangladesh Microinsurance Market Development Programme (BMMDP), funded by the Swiss Agency for Development and Cooperation (SDC), recently went live with two challenge funds. The funds will power efforts to diversify the microinsurance market and enhance reinsurer capacity.
The BMMDP goes back to 2017, when the implementing agency, Swisscontact, began market-testing microinsurance solutions -- focusing on climate risks to agricultural producers in crops, livestock and fisheries.
Bangladesh is the seventh most vulnerable to climate change; it ranks fifth in terms of associated economic losses, estimated at USD 3.72 billion in the past two decades. This poses serious challenges to Bangladesh's rural livelihoods, its ability to effectively fund disaster-relief and its food security in general. Small and medium producers in the farm sector (crops, livestock and fisheries) stand to lose most. These also happen to be the groups signified by financial exclusion and access to risk-management tools.
In this context, climate-risk insurance can be an important tool for promoting financial inclusion for farmers and farm-enterprises, and for shielding them from climate-induced financial shocks and destitution.
Between 2017 and 2023, BMMDP and its partners designed and tested innovative product designs like weather-index-based climate insurance (WIBCI), area yield index-based crop insurance, bancassurance models, and traditional products updated with digital technologies.
Evidence from BMMDP proved that there was latent demand for agri-insurance and that the market was willing to pay a reasonable price for products tailored to their respective needs.
One of the most significant insights was that microinsurance could give smallholder farmers the confidence to invest in high-value inputs or advanced production methods. Without access to a risk protection mechanism like insurance, farmers are often reluctant to engage in higher risk activities with higher expected returns. The evidence accords well with findings from GIZ's multi-country study of microinsurance programmes.
Over the years, Bangladesh has grappled with non-traditional agricultural insurance, and is yet to reach consensus regarding a definitive programme model. In recent years, the state-owned Sadharan Bima Corporation, supported by the World Bank, piloted weather-index based crop insurance in 2018, at a cost of nearly BDT 380 million. But the scheme came under fire from the Ministry of Agriculture, leading to the exclusion of crop insurance from the draft National Agricultural Extension Policy (NAEP) 2018.
However, the 'Strategies for Crop Sub-Sector' section of Bangladesh's 8th Five Year Plan (2020-25) clearly articulated the need for scaling farmers' access to credit, insurance, and associated services.
BMMDP's pilot interventions featured another WIBCI scheme in 2021, which demonstrated the value of public-private partnerships and market-based product design. With respect to the BMMDP model, a senior official from the Ministry of Finance said, "Government and other organizations should come forward to protect the farmers and provide the aid in form of Insurance through measuring the delivery costs and opportunity costs of other financial aids that the government is already providing."
With encouraging evidence from the market and from policymakers, BMMDP has now adopted a comprehensive sector-based approach. This means working with the supply-side, the demand-side and the policy-actors regulating both.
BMMDP is working intensively with insurance companies, tech startups and other market-actors in the value-chain to facilitate product prototyping, user-testing and go-to-market strategies.
It is also pursuing a reform agenda -- covering, for example, modernization of legal frameworks, consolidation of regulatory authorities, incentivizing industry investments in microinsurance and enhancing consumer protections. This work is complemented by capacity enhancements for nodal public agencies and specialized academies.
It is as part of this approach that the BMMDP has launched the funds. Applying consortia are to be led by insurance companies or insurtechs, and are expected to present comprehensive plans to innovate product-designs and/or delivery models via bmmdp.org. BMMDP will support final winners with technical assistance, international knowhow, industry linkages and awareness-creation activities. This signifies a unique opportunity for companies seeking to test new products and explore new segments. More information is available at bmmdp.org.
What is unique about the market systems development (MSD) approach employed by Swisscontact is that it does not attempt to introduce extraneous ideas or solutions to local challenges. Instead, it works by bringing together domestic market-actors and local innovation to forge homegrown solutions. It thus enables prevalent market forces to shape sustainable solutions to national challenges.
