Agricultural Research Management Information System

Home
Research Summary
Search
About Us
- ARMIS
- Brochure
Contact Us
Report
User Request
Data Input
Help
- Operation Manual
  - PDF
  - Video
- Program Area & Commodity
We have reached 37600 number of research entries at this moment.

- Logout

Research Detail

Home
Research
Detail

Problems and Prospects of Weather Index Based Crop Insurance for Rural Farmers in Bangladesh

Shahadat Hossain
Department of Finance & Banking, University of Chittagong, BangladeshWarocque Research Centre, University of Mons, Belgium

Abstract/ Executive Summary:

Weather index based crop insurance is a new product in developing countries that address the failure of traditional crop insurance due to the problem of adverse selection and moral hazard, cost of administration, monitoring, determination of indemnity, and standardization. This desk study conceptualizes weather index based crop insurance as an instrument to graduate poor farmers out of poverty trap. I examine the advantages of this product over traditional crop insurance based on developing countries experience. The author tries to address the problems and challenges in implementing this insurance product in low income countries. Based on literature it addresses some problems and issues in implementing this product in Bangladesh considering context specific issues of this country. Proper preparation for index measurement, premium determination, flexible product design, wider stakeholder involvement, public private partnership, and a ‘big push’ from government and donors through seed financing can promote weather index based crop insurance in Bangladesh.

Keywords: Crop insurance, Poverty, Weather index.

Location:

Start Date:

End Date:

Program Area: Knowledge Management

Non-commodity: Weather/Climate

Objectives:

To theoretically assess weather-index based crop insurance as an instrument to graduate poor farmers out of poverty trap, evaluate its viability in low income countries in general and in Bangladesh in particular, and
To find out the problems in its implementation in Bangladesh

Methodology:

This is completely a desk study based on available literature from different sources such as journals, working papers, World Bank and other development organizations’ websites and research publications that are relevant to the objectives of this study. Based on the analysis from international developing countries perspectives and country context information, I tried to identify the problems and prospects of weather index based crop insurance in Bangladesh.

This paper analyzes poverty trap and traditional agricultural insurance, weather index based crop insurance, present status of weather index based crop insurance in Bangladesh, and the way forward which covered preparation for effective determination of premium and index, less number of perils and multi-peril provision, risk layering option, varying weather index, wider stakeholder involvement and public private partnership, wider coverage, national and international support and re-insurance, and partner-agent model or full service model.

Source of Information: Developing Country Studies, Vol.3, No.12, 2013, Page: 208-220, ISSN 2224-607X (Paper) ISSN 2225-0565 (Online),

Article Link (Online Journal): http://iiste.org/Journals/index.php/DCS/article/view/8696/8932

Funding Source:

Budget:

Total Budget (Tk.) :

Achievement/Findings:

This desk study conceptualizes weather index based crop insurance, its application as an instrument to graduate poor farmers out of poverty trap, and examines viability of this insurance product in low income countries in general and in Bangladesh in particular as this program has not yet started in Bangladesh. This study also tries to find out the problems and challenges associated with implementation of weather index based crop insurance products in Bangladesh. Weather index based crop insurance is not the ‘one size fit for all’ solution, but it tries to address causes of failure of traditional crop insurance for addressing it in index insurance, especially adverse selection and moral hazard problems, cost of monitoring, cost of administering and cost related to indemnity determination and standardization. Most important issues in implementing weather index based crop insurance are: how successfully insurance companies are able to manage covariate and basis risks and manage reliable and adequate data. Some studies reveal that weather index based insurance in developing countries is facing problem of unpredictable weather cycle, heterogeneity of climatic risks, unfamiliarity and lack of proper knowledge. Insurance companies in these countries are not financially well equipped to cover large financial losses when the index trigger. Based on developing countries experience and considering the issues specific to Bangladesh, some issues are important to address: proper preparation for index measurement and premium determination, flexible product design using less number of perils and multi peril options and different risk layering. Wider stakeholder involvement, reinsurance facilities from national and international level with technical support and wider area coverage may increase its viability. Also it needs proper feasibility study and research. Experimentally launching the product, considering country context, ensuring demonstration effect through public private partnership, and a ‘big push’ from government and donors through seed financing may promote weather index based crop insurance in Bangladesh. Proper campaign and awareness creation through government sponsorship can be an effective strategy as is done in Colombia and Philippines for traditional micro-insurance. Implementation of this type of insurance is not an overly rosy picture, it requires time. The journey may be like the ‘race of tortoise’, where we hope, success may be after a decade, if the journey starts right now.

Knowledge Management: Journal