CROP INSURANCE IN BANGLADESH

Mesbah Uddin Mahmud Ratul

Roll : 31941030
Department : Management
 CROP INSURANCE & REASONS

• Crop insurance:
Crop insurance is an insurance arrangement aiming at mitigating the
financial losses suffered by the farmers due to damage and destruction of
their crops as a result of various production risks.
• Reasons for which crop insurance is necessary:
Crop insurance is a must to do step for a farmer to ensure safety in case
of any financial loss and there are some specific reasons why insurance
is necessary. Those issues are:
1. Fluctuation of weather:
• Rainfall • Temperature • Humidity • Wind • Cyclone • Hailstorm •
Thunderstorm;
2. Pest & diseases;
3. Fire;
4. Quality of inputs, seeds;
5. Soil;
6. Market prices; and
7. Flood.
 CROP INSURANCE AND FARMERS IN
BANGLADESH
• In the late 1970s SBC, a state insurance company, attempted to
introduce an individual farmer multiple peril crop insurance, MPCI,
program but that this program incurred heavy underwriting losses and
was withdrawn by the 1990s.

• WBG identify potential to develop Area Yield Index Insurance, AYII, in

Bangladesh for important cereal crops such as paddy/rice, wheat and
maize, and which would lend itself to specific linkage to crop-credit
provision. Any AYII program would be designed to complement the
current weather based crop index insurance initiatives being developed
by Sadharan Bima Corporation supported by ADB and Green Delta
supported by IFC.
 The Pilot Project

• Introduced in March 2014 by Sadharan Bima Corporation with

financing from the Asian Development Bank, a total of 6,772 marginal
farmers signed up for the Weather Index Based Crop Insurance
against the target of 6,000.

• A new weather index in conjunction with the Bangladesh

Meteorological Department was generated using weather data for the
past 25-30 years.

• For the pilot, drought-prone Rajshahi, flood-prone Sirajgonj and

cyclone-prone Noakhali were selected. Some 20 automated weather
observation machines were installed on the roofs of different
upazilaparishad buildings.

• The Pilot project cost Tk. 21.34 crore, of which Tk. 16.38 crore was
provided by the ADB and rest by the government.
 SBC crop insurance

• Starting in 1977, SBC introduced a conventional individual-grower

multiple-peril crop insur­ance (MPCI) yield-shortfall policy that provided
coverage against a wide range of climatic perils, including the
potentially catastrophic climatic perils of floods, droughts, and winds
and biolog­ical perils of pests and diseases;

• From 1977 to 1995, the individual grower MPCI program was insured
exclusively by SBC, which retained 100 percent of the losses without
any external reinsurance protection, and there was no premium
subsidy or other financial support from the government;

• SBC’s budget for the crop insurance program was very limited and it
never achieved scale or sustainability;

• On account of the very poor financial performance the SBC Crop

Insurance Program was ter­minated by government in 1995.
Conclusion showing benefits of crop insurance in
Bangladesh
• In Bangladesh it is a must to do the crop insurance to make sure that the
future of Bangladeshi farmers are safe so that they can do farming even
after any disaster and for which Bangladesh will not face any scarcity in
food.

• On the other hand, banks can give their service without any obstacle
because crop insurance will help banks to increase the repayment
capacity of debtor by avoiding the risk of nonpayment in events of crop
damage or failure.

• Moreover, government can reduce the payment of relief package and we

can get a prosperous, stable and happy nation.