Crop Insurance as a Risk Management Strategy in Bangladesh

season. Sunamgonj, as Haor region, mostly produce one crop in a year. Farmers willing to
pay minimum amount compared to other two regions and within Tk. 50 to 100 per month.
While in Lalmonirht, they can produce 2-3 crops. Premium willing to pay there varies from
Tk. 50 to 300 per month. At Pirojpur mostly produce two crops. Premium level varies around
Tk. 50 to 200. On an average the willingness to premium payment rate is around 3-6% of
yield value per season. The amount varies among rich, poor and medium farmers as well as
high, low and medium risk zones. At Sunamgonj it is evident that the rich people like to pay
more, likewise the highly vulnerable group.
Organizational structure preferred: About the choice of organizational structure, there are
mixed reaction. Farmers from Sunamgonj and Pirojpur preferred NGO as the most suitable
for CI programme. However, farmers from Lalmonirhat preferred Bank. Probably it is
because of the confidence level. For some reputed NGOs people have confidence, as it is
better than bureaucratic harassment and corruption of government bodies. However, the
sustainability of NGOs in the long run is crucial question as well. In Lalmonirhat it happened
that an NGO took money for Crop Insurance purposes but later became bankrupt and went in
hide. There is no such problem for government organization or large insurance companies or
Banks.
Other concern regarding CI implementation: In most cases farmers want them to be
protected from all sorts of disasters, i.e. multi-peril. Regarding adverse selection and moral
hazards, their answer implies no such intention. It may be true for some initial years as
because they might not abruptly change their cultivation practice simply because they are
under crop insurance program. With the progress of CI programme, whether they will indulge
in such adverse selection and moral hazards depends on the administrative quality or integrity
level. At present they are rather suspicious that whether they will get adequate compensation
in the long run.
Table 6.2: Farmer’s response to CI
Mode of Self Resilience Land ownership Vulnerability level
Low Medium Large Low Medium high
% % % % % %
Bank Loan 14 25 22 10 27 20
Micro Credit 20 17 19 38 3 3
Assistance from NGO 43 41 38 37 51 53
Loan from Local Mohajon 22 17 20 14 20 24
Premium (willing to pay) Land ownership Vulnerability level
Low Medium Large Low Medium high
% % % % % %
Tk. 50 61 50 27 53 53 20
Tk. 100 14 35 40 29 31 36
Tk. 200 23 11 15 11 8 17
Tk. 300 2 2 12 5 7 16
Tk. 400 0 0 4 1 1 5
Tk. 500 0 2 4 1 0 5
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