Piloting a Weather-Index-Based Crop Insurance System in Bangladesh: Understanding the Challenges of Financial Instruments for Tackling Climate Risks

2021 | journal article; research paper. A publication with affiliation to the University of Göttingen.

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​Al-Maruf A, Mira SA, Rida TN, Rahman MS, Sarker PK, Jenkins JC. ​Piloting a Weather-Index-Based Crop Insurance System in Bangladesh: Understanding the Challenges of Financial Instruments for Tackling Climate Risks​. ​​Sustainability. ​2021;​13​(15):​​8616​. ​doi:10.3390/su13158616. 

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Authors
Al-Maruf, Abdullah; Mira, Sumyia Akter; Rida, Tasnim Nazira; Rahman, Md Saifur; Sarker, Pradip Kumar; Jenkins, J. Craig
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 .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.
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 .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.
Issue Date
2021
Journal
Sustainability 
Organization
Fakultät für Forstwissenschaften und Waldökologie ; Burckhardt-Institut ; Abteilung Forst- und Naturschutzpolitik und Forstgeschichte 
eISSN
2071-1050
Language
English
Sponsor
Belmont Forum-G8
Open-Access-Publikationsfonds 2021

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