Asian bank and Japan design crop insurance system for Bangladesh farmers

The Asian Development Bank (ADB) and Japan have undertaken a project to develop a new crop insurance system for small farmers in Bangladesh who often lose crops to natural calamities

ADB said in a statement that it has approved the project recently with Japan’s US$2mn grant. Bangladesh government will provide $420,000.

ADB’s senior natural resources and agriculture economist Rezaul Khan was quoted in the statement as saying, “Small scale farmers with few resources are typically unable to insure their crops against extreme weather events and can lose their entire income every time a storm hits.”

He added that the new project aimed at developing a new ‘affordable type of insurance product’ will ‘allow and encourage more farmers to protect their crops and source of livelihoods.’

Geography makes Bangladesh one of the most climate-vulnerable countries in the world and it is estimated that agricultural GDP will be 3.1 per cent lower each year until 2050 due to climate change.

ADB pointed out that there is no crop insurance currently available for Bangladesh’s farmers after the huge financial losses incurred in the traditional agricultural insurance.

The new system, weather index-based crop insurance, that will incorporate historical weather and crop production data, is considered to be cost-effective and efficient than traditional agriculture insurance. It will reduce farm-level monitoring and transaction costs.