Crop Insurance as a Risk Management Strategy in Bangladesh

odies involved in or are interested in crop insurance provision or management, or any other
mutual risk support mechanisms were identified. Awareness among farmers and
understanding of the insurance procedure are very important for a success of the program.
Lack of it makes scope for moral hazards, corruption and inefficiency of the program.
Representatives from farmers group is again required to understand their needs and problems.
Role of Government: Several organizations of Bangladesh Government, especially
Department of Insurance, the ministry of Agriculture, Ministry of Commerce, Ministry of
Finance, Ministry of Food and Disaster Management and the local government authorities
might play important role there. The main role here to play by government agencies are to
include it in the national policies, define criteria for CI program, regulate and monitoring the
process, subsidizing CI if required and support with manpower or including CI within the
existing administrative structure of local government appropriately.
Academic Institutes: Crop Insurance is still an emerging topic and there are a number of
methodologies there. The applicability or suitability of the methods varies among countries
and largely depends on the socio-economic, geographical and climatic characteristics of the
region. Including Crop Insurance, micro-insurance is becoming a fast growing sector
nowadays, which requires adequate institutional support as well. Institutes that might play
important role there are Insurance Academy, Institute of Microfinance, BARC, Agrieconomics
Department of Agriculture Universities, BARI, which include a large number of
economists and insurance experts. One of the reasons why SBC introduced CI project failed
last time was that it was introduced hastily without proper training and understanding of the
SBC officials about the crop insurance process.
Donors and International organizations: As it is evident from the experience worldwide that
in most cases Crop Insurance project are not financially profitable, i.e. the expenditure in the
form of indemnity and administrative cost is much larger than earnings from premium (Table
3.7). The international and donor organizations, such as UNDP, FAO, World Bank, GEF &
any other agencies interested can provide subsidy or monetary supports to such CI project
that they usually provide in other form, especially in developing countries. Under UNFCC
proposal there are possibilities that CI might be an approach for developing countries to take
compensation from developed countries due to climate change effects.
In fact, all the stakeholders mentioned above need to work together in an integrated manner
to support CI processes. For example, the huge moral hazard in the CI process could be
substantially reduced if the damage assessment authority was given to a committee composed
of insurance expert, agriculture specialist, economist, climate expert, local govt. officials and
farmers group together instead of just one person or only insurance company officials. A
half-day Inception Workshop was arranged for discussion of the proposed methodology,
inviting all the relevant stakeholders to collect and incorporate their views and ideas in the
research methodology.
7.3 Way Forward: Proposal to Pilot Weather Index-based CI Model in Bangladesh
A pilot project can be undertaken to introduce Weather Insurance in Bangladesh at several
locations. Under the project a detail layout of policy and institutional framework,
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