Agricultural Insurance Solutions Bangladesh

Shifting the Δ along the delta

Bangladesh is highly vulnerable to weather risks. Climate change is intensifying the situation. Smallholders are particularly exposed. Weather extremes often devastate their crops and livelihoods. These farmers have very few ways to cope with such disasters. Crop insurance offers a new protection option. Following initial successes, there is now plenty of scope for expansion.

To develop the smallholder agricultural insurance system, our Bangladesh team and partners have implemented two main projects. Surokkha created a conducive environment by promoting risk-mitigation measures for climate change adaptation. Partners here included the Swiss Embassy and Swisscontact. Surokkha ran from 2018-2022. The second project began in 2020. ‘Boosting Agriculture Risk Mitigation in Bangladesh through Climate Insurance for Smallholders’ is funded by the InsuResilience Solutions Fund. It focuses on crop insurance and the development of an ‘insurtech’ platform.

Agricultural insurance for smallholders remains a challenging sector in Bangladesh. Flourishing public-private partnerships are essential. As well as the need to overcome several market weaknesses, the countrywide expansion will require broad supportive action by the government. However, Surokkha greatly exceeded its original target of insuring 233,000 smallholders. After piloting various distribution models, it covered close to 422,000 farmers across 16 districts. More than 2400 access points included Farmers’ Hubs, contract farming units, Krishite Syngenta retailers, and the branches of micro-finance institutions. The number of policies sold rose rapidly, reaching a total of more than 574,000 by 2022. By then, public and private insurers had paid out some $772,000 to almost 144,000 farmers.

Capacity-building plays a key role in establishing smallholder insurance. SFSA has run financial literacy programs for distribution partners, insurers, and farmers on a range of relevant topics. Smallholders also receive extra services such as weather forecasts and farming advice.

Further information

Much of Bangladesh forms one of the world’s largest deltas. Floods, cyclones, tidal surges, drought, temperature fluctuations, and untimely rainfall are frequent occurrences. They can rapidly spell disaster for smallholders. Weather Index Insurance (WII) helps shift the risk from farmers’ shoulders and increase their resilience.

Our Foundation has been working on WII since 2009, initially in Kenya. In Bangladesh, we started in 2016 with a feasibility study, product development, and ‘dry run’. In 2018, the Swiss Embassy in Bangladesh included a crop insurance component in the Bangladesh Microinsurance Market Development Project for Promoting Risk Mitigation Measures for Climate Change Adaptation (Surokkha). This was implemented and co-funded by Syngenta Foundation for Sustainable Agriculture Bangladesh (SFSA Bangladesh) and managed by Swisscontact. Since then, SFSA Bangladesh has focused on piloting and testing commercially viable and sustainable crop WII. The aim is to establish a national market for such products.

SFSA Bangladesh has also implemented the ‘Boosting Agriculture Risk Mitigation in Bangladesh through Climate Insurance for Smallholders Project’. Funding came from the InsuResilience Solutions Fund (ISF). The ISF project designed weather insurance for maize, potatoes, beans, tomatoes, and flooding, as well as both aman and boro rice. (These types are generally grown in December-January and March-May, respectively). The ISF partners also developed the ‘Resilience Engine’. This insurtech platform provides a wide range of services. They include actuarial information, a climate data library, and an insurance marketplace.

SFSA Bangladesh piloted the insurance through four different distribution channels. One of these was the Krishite Syngenta retailer network linked to the company Syngenta. The retailers offered smallholders a combination (“bundling”) of crop insurance with farm inputs. A second distribution route was via micro-finance institutions, made possible by BRAC, Eco-Social Development Organization (ESDO), and Gram Unnayan Karma (GUK). A third approach in the pilot phase was ‘service-linked’. Here, GBK Enterprise (GBK-E) as a master franchisee worked with its Farmers’ Hubs network established by our Foundation. Fourthly, we also brought insurance to the contract farmers working with Ejab Agro Ltd. Sadharan Bima Corporation (SBC) and Green Delta Insurance Company Limited (GDIC) underwrote the insurance products.

In the pilot phase, insurance distribution worked best when combined with inputs. Such bundling, we believe, is likely to make the micro-insurance offer the most sustainable. A further advantage, in this case, is that the Krishite network reaches all over the country. This is likely to be a major aid to scaling up. Distribution via Farmers’ Hub also offers considerable potential, because of the large number of smallholder contacts per Hub. To fully realize this potential, however, the partners will need to develop insurance for seedlings raised in Hub nurseries. With just one buyer involved, the contract farming approach got insurance to only a relatively small number of smallholders. To be more successful, this distribution channel would have to involve many more companies.

From initially one policy type for potatoes, our local partners and we have expanded the range to 18 insurance products. As well as buying insurance, smallholders receive weekly weather forecasts and farming advice via their phones. These additional services contribute to farmers’ resilience. SFSA Bangladesh also worked hard to build awareness and educate insurers, distributors, and other service providers about affordable agricultural insurance solutions.

As of late 2022, our insurance program had reached 16 districts of northern, southern, and eastern Bangladesh. Cumulatively since 2018, 421,767 smallholders had bought 574,527 policies through the four distribution models. The rate of sale accelerated rapidly. In the first year, 2018, farmers bought 171 policies. By 2022, this had risen to more than 359,000.

Many Bangladesh smallholders get three crops per year. By late 2022, the insurance had run for 15 cultivation seasons. The total crop value insured in this period was US$ 14,406,758. Sadharan Bima and GDIC collected premiums worth $770,235 and paid out $771,986 to 143,705 farmers.

Our Foundation has already made an impact on crop insurance in Bangladesh. Commercial partners want to continue this protection as a service for smallholders; the farmers increasingly view it as part of their crop production. We take a long-term view with insurance: There is still a long way to go before all Bangladesh’s farmers enjoy the full benefits of this risk mitigation. Our focus is currently on capacity building, policy development, and nationwide coverage.

Bangladesh: An Experience of Crop Insurance
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