Farmers around the world are at the mercy of the weather, but those in Bangladesh are more vulnerable than most with the low-lying country highly susceptible to the increasing monsoon floods and tropical cyclones brought by climate change. This also means they are in huge need of ways to protect their precarious livelihoods.
"Mahasen is just the latest cyclone to hit Bangladesh. Between 1960 and 2010, about 58 of them hit Bangladesh, tearing down farms and wiping out crops," said Rezaul Khan, Senior Natural Resources and Agriculture Economist at the Asian Development Bank (ADB). "Having insurance on their crops would mean these devastating climatic events stop pushing farmers and their families into penury."
In March, ADB kicked off a $2.5 million pilot program to bring crop insurance to farmers in Bangladesh. The program - financed with $2 million from the Japan Fund for Poverty Reduction with additional finance from the Japan Aerospace Exploration Agency and the Bangladesh government - will design and pilot Weather Index-Based Crop Insurance, or WIBCI, targeted at the small and marginal farmers who are most vulnerable to losing everything when the weather turns sour.
Around half of the Bangladesh workforce is engaged in agriculture but around 75% of Bangladesh’s 152 million strong population - and 80% of the country’s poor - live in rural areas and depend on agriculture in one way or another. More frequent droughts, more intense flooding, and more regular storms brought about by climate change have exacted a heavy toll on farmers. Cyclone Sidr, which slammed into Bangladesh with a vengeance in 2007, for example, destroyed about 95% of crops in coastal districts.
However, farmers in Bangladesh haven’t been able to protect themselves because traditional insurers haven’t been able to find a suitable way to reach smallholders or shape crop insurance suitable for farmers in remote areas, who are under-educated on how to protect themselves and often have no collateral.
The insurance being planned under the new ADB-administered program, would allow a farmer to claim compensation from his or her insurer when certain climactic trigger points are hit, such as when a cyclone or tropical storm in a given area hits a specified magnitude or when rainfall rises above or drops below a certain level. Having this kind of cover would give farmers the ability to continue to plan and save for the longer term even if their harvests are suddenly and arbitrarily destroyed by bad weather.
"We'd expect that insurance would be piloted in select parts of Bangladesh in 2014 and if all goes well, could gradually be rolled out nationwide."
— Rezaul Khan, Senior Natural Resources and Agriculture Economist at the ADB
At a first step, the pilot program will generate a new weather index in conjunction with agriculture research institutions and weather and meteorological departments using weather data for the past 25-30 years. It will then find local insurance partners to distribute and administer the insurance product. The program will also work with the Bangladesh government to make sure the right policy and regulatory frameworks are in place to support the new financial products.
"Although this will be a new product for Bangladesh, farmers in India, Sri Lanka, Indonesia, and the Philippines as well as in some countries in Africa and Central America are already using this kind of insurance, and say it is helping make their lives easier," said Mr. Khan. "We’d expect that insurance would be piloted in select parts of Bangladesh in 2014 and if all goes well, could gradually be rolled out nationwide."
In India, where cyclone Mahasen is bearing down, and where weather index-based crop insurance has been available since 2004, 12.7 million farmers bought the insurance between 2007 and the summer of 2011.
Separately, ADB working with other development partners on a $150 million project to climate-proof rural roads in coastal areas of Bangladesh so farmers can get their produce to markets whatever the weather, and to build cyclone shelters to keep farmers and their families safe.