Report No. 53081-bd agricultural Insurance in Bangladesh Promoting Access to Small and Marginal Farmers June 2010 the world bank south Asia Poverty Reduction, Economic Management, Finance and Private Sector Development Insurance for the Poor



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Report No. 53081-BD

Agricultural Insurance in Bangladesh
Promoting Access to Small and Marginal Farmers

June 2010
THE WORLD BANK

South Asia Poverty Reduction, Economic Management, Finance and Private Sector Development

Insurance for the Poor, GCMNB, Finance and Private Sector Development

CURRENCY EQUIVALENTS

(Exchange rate effective December 1, 2009)



Currency Unit = Bangladesh Taka

US$1.00

Tk 69.04



GOVERNMENT FISCAL YEAR

July 1—June 30




Table of Contents



Acknowledgements iii

Executive Summary iv

Context iv

Challenges for the Development of Agricultural Insurance in Bangladesh v

Options for Consideration viii

Next Steps xi

Chapter 1: Introduction 12

Importance of Agriculture in Bangladesh 12

Government Policy for Agriculture and Climate Change 12

Role of Rural Institutions and Farmer Access to Financial and Other Support Services 14

Exposure of Agriculture to Natural and Climatic Disasters 16

Objectives of the Study and Selection of Three Study Districts 18



Chapter 2: Review of Farmers’ Financial Protection against Natural Disasters in Bangladesh 20

Disaster Relief Programs 20

Bangladesh Insurance Sector 23

Supply of Agricultural Insurance in Bangladesh 27

Demand for Agricultural Insurance in Bangladesh 36

Chapter 3: Agricultural Risk Assessment in Bangladesh 39

Objectives and Scope of Agricultural Crop, Livestock, and Weather Risk Assessment 39

Data Availability for Crop, Livestock, and Weather Risk Assessment 39

Agricultural Crop Production in Bangladesh 40

Key Climatic Perils and Crop-Area Damage Assessment 48

Regional-Level Risk Assessment of Crop Production and Yields 51

Weather-Risk Assessment and Impact on Crop Production and Yields 60

Livestock-Risk Assessment 69



Chapter 4: Opportunities for Agricultural Insurance Product Development in Bangladesh 75

Potential Crop Insurance Policy Options for Bangladesh 75

Named-Peril Crop Insurance (Hail, Frost, Wind) 77

Multiple-peril Crop Insurance (MPCI) 81

Area-Yield Index Crop Insurance 82

Livestock Insurance 99



Chapter 5: Operational Issues for Agricultural Insurance 107

Traditional Named-Peril Crop Insurance and Area-Yield Index Insurance 107

Crop-Weather Index Insurance 111

Livestock Insurance 114



Chapter 6: Institutional and Financial Considerations 116

Public-Private Partnerships in Agricultural Insurance: International Experience 116

Public-Private Partnership Options for Agricultural Insurance in Bangladesh 120

Risk Financing and Reinsurance Considerations 129



Glossary 132

Bibliography 141



Abbreviations and Acronyms
ADB Asian Development Bank

AICI Agricultural Insurance Company of India, Ltd

ASA Name of a prominent MFI in Bangladesh; the name means “hope”

BASIC Bank of Small Industries and Commerce

BBS Bangladesh Bureau of Statistics

BCCSAP Bangladesh Climate Change Strategy and Action Plan

BKB Bangladesh Krishi Bank

BMD Bangladesh Meteorological Department

BSE Bovine Spongiform Encephalitis

CLDP Community Livestock Development Program

CoV Coefficient of Variation

CRAMR Crop Risk Assessment Model Regional

CRAMU Crop Risk Assessment Model Upazila (sub-District)

CWII Crop-Weather Index Insurance

DAE Department of Agricultural Extension

DMB Disaster Management Bureau

DHM Department of Hydrology and Meteorology

DLS Department of Livestock Services

DoA Department of Agriculture

DMF Disaster Management Fund

DRR Directorate of Relief and Rehabilitation

DSCP Deprived Sector Credit Program

FAO Food and Agriculture Organization

FMD Foot and Mouth Disease

GCMNB Global Capital Market Non Banking Financial Institutions Division

GFDRR Global Facility for Disaster Reduction and Recovery

GoB Government of Bangladesh

GR Government Relief

HH Household

HPAI Highly Pathogenic Avian Influenza

HYV High-Yield Variety

IRB Brazilian Reinsurance Institute

IDRA Insurance Development and Regulatory Authority

IU Insured Unit

LDCs Least Developed Countries

MFI Microfinance Institution

MIME Microinsurance Mutual Entity

MoA Ministry of Agriculture

MoF Ministry of Finance

MoFDM Ministry of Food and Disaster Management

MoFF Ministry of Environment and Forests

MoFL Ministry of Fisheries and Livestock

MPCI Multiple Peril Crop Insurance

NAIS National Agricultural Insurance Scheme

NGO Non-Governmental Organization

NDVI Normalized Deviation Vegetation Index

OIE Office Internationale des Epizooties

PCBs Private Commercial Banks

PKSF Palli Karma Sahayyak Foundation

PML Probable Maximum Loss

PPR Pests de Petits Ruminants

PSCP Priority Sector Credit Program

RAKUB Rajshahi Krishi Unnayan Bank

SACCOS Savings and Credit Co-operatives

SASFP South Asia, Finance and Private Sector Development Unit

SBC Sadharan Bima Corporation

SCBs State-owned Commercial Bank

SHG Self-Help Group

SIF Self Insurance Fund

SVD Swine Vesicular Disease

TEO Technical Extension Officer

Tk Bangladesh Taka

TSO Total Sum Insured

TSU Technical Support Unit

VO Village Organization

VVL Veterinary Vaccine Laboratory




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