Abstract
Bangladesh is one of the most vulnerable countries in the world to extreme climate events. With over 60% of its population living in rural areas, over a third of which lives under the poverty line and depends on agriculture, these climate stresses constitute a major challenge. The traditional financial instruments, e.g., microcredit and relief programs, continue today. However, how climate risk can be tackled through innovative financial instruments focusing on agriculture farms and farmers is crucial. Considering this issue, the Sadharan Bima Corporation and the Bangladesh Meteorological Department joined forces in 2014 to launch a $2.5 million three-year pilot project on weather-index-based crop insurance (WIBCI) executed by the Financial Institutions Division of the Bangladesh government’s Ministry of Finance. This study examined the basic strategy of this pilot project, the major challenges confronted, and possible solutions for creating a successful weather-index-based crop insurance scheme in Bangladesh. We relied on key informant interviews, informal discussions, focus group discussions, and in-depth interviews with the major stakeholders of the WIBCI pilot. These showed the WIBCI pilot to be a promising initiative that still faces problems from limited weather data, a costly business operations system, farmer insurance illiteracy, and fatalism, as well as problems with designing insurance products and recruiting qualified personnel. We compared this WIBCI pilot against the challenges of other projects, recommending best practices for a viable weather-index-based crop insurance system. The insurance mechanism of this study may apply to other vegetation sectors of Bangladesh, e.g., forest plantation or agroforestry for protecting natural resources from natural disasters.
Highlights
IntroductionSmallholder farmers tend to underinvest in new high-yield crops and farm technology [6], withholding money to self-insure against weather and crop
We interviewed officials of the local micro-finance organizations involved in implementation: the Centre for Actin Research Barind (CARB), the International Network of Alternative Financial Institutions (INAFI), and the United Development Initiatives for Programmed Action (UDDIPAN)
16,426 farmers were sensitized on climate risk, weather-index-based crop insurance (WIBCI), and agri-risk management
Summary
Smallholder farmers tend to underinvest in new high-yield crops and farm technology [6], withholding money to self-insure against weather and crop. Sustainability 2021, 13, 8616 farm technology [6], withholding money to self-insure against weather and crop risk by using old seeds and not investing in machinery and the like. Traditional financial reduction strategies, such as borrowing from family, selling land, using microcredit, and risk-reduction strategies, such as borrowing from family, selling land, using microcredit, saving, are often insufficient to tackle climate-induced risk in Bangladesh. Like microinsurance, ance, including crop insurance microinsurance, customized to the specific needs of the including crop insurance microinsurance, customized to the specific needs of the poor, poor, are an effective instrument to address risk [7]. Since 1970–2020, the country has experienced perienced multiple microinsurance initiatives focused health and agriculture multiple microinsurance initiatives focused on health andonagriculture with a diversewith rangea diverse range of successes and failures
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