Research for Agricultural Insurance in South Asia: A Regional Dialogue

This article was originally posted on  by Berber Kramer and Patrick Ward

Julie Lang/IFPRI

In South Asia, livelihoods are intricately intertwined with agricultural production, and thus highly dependent on weather. For millennia, the yearly monsoon rains have been the lifeblood of agriculture, but climate change is making this annual boon increasingly unpredictable both in timing and intensity, exposing farmers’ livelihoods to increased production risks.

There is considerable interest within the international development community in mitigating these risks through insurance. While insurance has been around for a very long time, many of its more traditional forms have suffered from low demand and asymmetric information between insured and insurer, giving rise to adverse selection and moral hazard.

The agricultural research community has responded to these challenges by identifying and developing research-based innovations for agricultural insurance, such as index-based insurance programs that can minimize the severity of adverse selection and moral hazard; the use of cutting edge remote sensing and information technologies; and the bundling of insurance with novel “climate-smart” agricultural technologies and practices (CSA) that are more resilient to adverse weather conditions than traditional technologies and practices, thus serving an important risk management function in their own right.

In order to better understand how CGIAR research can further contribute to the development, implementation, and evaluation of agricultural insurance programs, IFPRI organized a regional dialogue in Dhaka, Bangladesh on December 17. The event was mounted in partnership with the CGIAR research programs on Policies, Institutions and Markets (PIM) and Climate Change, Agriculture, and Food Security (CCAFS), as well as the Cereal Systems Initiative for South Asia (CSISA).

Policy makers, practitioners, and researchers from Bangladesh, India, and Nepal convened to share their experiences with implementing agricultural insurance across the region, and to learn about the latest agricultural research on this subject. The chief guest, Wais Kabir, executive director of the Krishi Gobeshona Foundation, and keynote speaker, Saleemul Huq, director of the International Center for Climate Change and Development(ICCCAD), helped to lay the foundation for the day’s discussion.

Huq’s keynote address highlighted the role of agricultural insurance as an instrument for meeting the key targets in the Paris climate agreement—not only by offering compensation for crop losses and other economic damage, but also by providing a mechanism to improve adaptation, with subsequent benefits from reduced agricultural sector emissions. The workshop presented evidence and case studies that vividly illustrated how research can help improve insurance products and programs to help meet compensation, adaptation, and emissions targets.

One of the main challenges in implementing the largest agricultural insurance program in South Asia—India’s Pradhan Mantri Fasal Bima Yojana (PMFBY)—is loss assessment: To verify losses, PMFBY aims to measure average yields at the village level through intensive crop-cutting exercises. This is a daunting task, requiring crop samples to be collected from three million fields within the short period before harvest. Herein lies an important role for the agricultural research community and the CGIAR more specifically. Agricultural research has helped advance the use of satellite imagery and other remote sensing techniques for crop loss assessment, and case studies are showing that it is possible to use such methods to detect prevented or delayed sowing, which could ultimately reduce the number of crop samples required for village-level yield assessments.

While promising, remote sensing is hardly a panacea. First, the resolution of open-access or affordable satellite imagery is still too coarse to detect plot-level losses. Second, the notion of satellites orbiting the earth and collecting images from space is an abstract concept to many farmers, and much evidence has shown that insurance products must be presented with simplicity and transparency to generate sufficient interest among potential buyers. Third, data processing and evaluation of remotely sensed images is often a major challenge. Unmanned aerial vehicles (UAVs) offer higher resolution imagery than satellites, but are expensive to operate and may face various regulatory hurdles in different contexts.

There are other solutions that can complement remote sensing techniques and address some of these challenges. The IFPRI-led picture-based crop insurance (PBI) project, for example, demonstrates that it is possible to engage farmers directly in taking a stream of smartphone pictures to document crop losses. Going forward, researchers from CGIAR and other agricultural research institutions will have an important role to play in evaluating and validating different interventions.

The agricultural research community can also play an important role by positioning insurance as one instrument in a larger portfolio of risk management tools. Smallholder farmers can also shield their livelihoods from risk through savings, credit, and informal insurance networks, and by adopting CSA technologies. Examples of the latter include conservation agriculture (a suite of sustainable agricultural and land management practices) and stress-tolerant cultivars such as drought-tolerant maize or flood-tolerant rice.

CGIAR researchers, working with counterparts from national agricultural research systems, have developed many improved seed varieties for various staple crops that can reduce farmers’ exposure to weather-related production risk and increase yield stability. But these stress-tolerant varieties can protect crops only up to a point, leaving production exposed in the event of severe droughts or floods. When sold in tandem with a complementary insurance product, however, the bundle provides a near comprehensive risk management solution, as demonstrated by IFPRI-led research in Odisha, India. Under this approach, weather index insurance can be designed to pay out only under more extreme weather conditions causing catastrophic losses, while CSA technologies shield livelihoods from more moderate weather shocks and accompanying income losses. This can also help lower premiums, improving the demand for insurance.

A final, important issue that arose during the dialogue is that the countries of South Asia vary in many aspects: In topography and the risks farmers face, and in the policy and regulatory environments where insurance markets operate. In India, for instance, the government is very active in promoting agricultural insurance under PMFBY through large subsidies, while in Bangladesh and Nepal, insurance is not a prominent feature of agricultural development strategies or policies. Such differences raise important questions about how to best organize insurance markets and innovation activities country by country. These questions remain unanswered, but may prove to be an important area for IFPRI’s policy research in the coming years.

Berber Kramer is a Research Fellow in IFPRI's Markets, Trade, and Institutions Division; Patrick Ward is a Research Fellow in IFPRI's Environment and Production Technology Division.

Empowering women in Bangladesh by strengthening the agriculture-nutrition-gender nexus


Cross-posted from written by Akhter Ahmed, Julie Ghostlaw, and Nusrat Hossain

This week's International Women’s Day 2017 celebrates the social, economic, cultural, and political achievements of women. Despite significant strides toward gender equality in Bangladesh, there are still many barriers to women’s participation in the agriculture sector. Evidence from IFPRI’s research in Bangladesh shows that an increase in women’s empowerment in agriculture helps to move people out of poverty; improve household, child, and maternal dietary diversity; and increase agricultural diversity.

Ministry pilot project links agriculture, nutrition, and gender
Motivated by this research-based evidence, IFPRI designed the Agriculture, Nutrition, and Gender Linkages (ANGeL) project, a two-year effort piloted by the Bangladesh Ministry of Agriculture through its Department of Agricultural Extension. ANGeL is evaluating the impact of three types of interventions for promoting nutrition and gender-sensitive agriculture:

  • Agriculture Production—Facilitating the production of the high-value food commodities rich in essential nutrients through the diversification of crops, livestock, and the like.
  • Nutrition Knowledge—Conducting high-quality training in behavior-change communication to improve people’s knowledge of nutrition.
  • Gender Sensitization—Undertaking activities to empower women and raise their status while encouraging gender parity.

Results highlight women’s persistent disempowerment
Before launching ANGeL’s field-level activities, empowerment data were collected from 4,000 households across 16 districts in rural Bangladesh.
ANGeL baseline results (graph at upper right) show that 69 percent of women are disempowered. In other words, only 31 percent of women are empowered—10 percent less than the share of men who are empowered (41.5 percent).

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How microfinance has reduced rural poverty in Bangladesh

Cross-posted from the website written by Sara Gustafson and Shahidur Khandker

A woman at a market in Bangladesh. A new book shows that the growth of microfinance institutions over two decades in Bangladesh has helped the rural poor diversify their economic activities and boost incomes, lifting some 2.5 million people out of poverty.
A woman at a market in Bangladesh. A new book shows that the growth of microfinance institutions over two decades in Bangladesh has helped the rural poor diversify their economic activities and boost incomes, lifting some 2.5 million people out of poverty.

As microfinance institutions (MFIs) grow in many countries worldwide, debate continues over whether such programs truly benefit the poor. Proponents emphasize the need for innovative ways to provide poor populations access to financial services. Critics argue any successes may be temporary because microfinance programs require training and entrepreneurship skills, which many poor populations lack. In addition, some fear that beneficiaries may be charged high interest rates or become dependent on MFIs, borrowing more than they can pay back and becoming further trapped in poverty.

Beyond Ending Poverty, a new book published by the World Bank and authored by Shahidur Khandker of IFPRI, Baqui Khalily, and Hussain Samad, examines this debate in the context of Bangladesh, finding that microfinance institutions there have had sustained benefits over two decades in reducing poverty and increasing incomes. Microcredit accounted for a 10 percent reduction in rural poverty in Bangladesh over that time—meaning MFIs lifted some 2.5 million Bangladeshis from the ranks of the poor.

When Bangladesh’s microfinance sector was first established in the 1970s, its main goal was reducing rural poverty by providing microcredit loans for non-crop activities such as trading, and raising livestock and poultry. These loans were funded mainly by the government of Bangladesh and bilateral donors through group-based savings and lending programs.

Today, Bangladesh’s MFIs cover some 32 million members and give out more than $7.2 billion annually. Instead of relying on the savings of borrowers, MFIs now have access to institutional funds, including commercial banks. Modern microfinance in Bangladesh has expanded its scope from home-based activities and self-employment to include savings and insurance, microenterprises, and productive employment.

Microcredit also helped to diversify borrowers’ economic activities, boosting incomes in the process. Household income grew over the study period, driven by rising non-farm income. For households diversifying into non-farm activities, income growth was almost 29 percent higher than that of their counterparts who stuck exclusively to farming. The reduction in moderate and extreme poverty for this group was almost 8 percent higher. Better access to credit was found to be a key factor in promoting this shift.

But MFIs, despite their traditional focus on non-farm activities, have also aided farmers. Borrowing from an MFI raised farm income and reduced reliance on wage income, producing significant positive effects for women and marginal farmers. A 10 percent increase in women’s credit use was found to increase crop income by 3.5 percent, non-crop income by 2.8 percent, and total farm income by 0.7 percent. In addition, borrowing by both men and women has had important impacts on income, labor supply, household assets and net worth, and children’s schooling.

The book’s findings are based on data from household long panel surveys covering the period 1991-92 to 2010-11. This 20-year study period matters, the authors argue, because the benefits of microfinance programs—such as increased income generated through new self-employment schemes—take time to realize; in addition, given the growing complexity of the microfinance sector in Bangladesh, this broad range of data was useful in untangling the true effects of MFIs on the country’s rural poor.

The authors compared the operational efficiency data for Bangladesh’s leading MFIs with comparable data for MFIs in India, Indonesia, Mexico, Thailand, and Vietnam, finding that two of Bangladesh’s top MFIs (Grameen Bank and BRAC) are among the world’s most efficient microfinance institutions.

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IFPRI-WFP Seminar: What Kinds of Social Safety Net Transfers Work Best for the Rural Ultra Poor?

Bangladesh Source: (Flickr) IFPRI
Source: (Flickr) IFPRI

On Tuesday, May 26, The Safety Net Transfer Modality Research Initiative (TMRI), jointly implemented by the International Food Policy Research Institute (IFPRI) and the UN World Food Programme (WFP), will organize a seminar to present the final findings of the research. Continue reading "IFPRI-WFP Seminar: What Kinds of Social Safety Net Transfers Work Best for the Rural Ultra Poor?"

Green gains?

Source: Flickr (IFPRI South Asia)  Mother and child in Saturia, Bangladesh
Source: Flickr (IFPRI South Asia)
Mother and child in Saturia, Bangladesh

Nutrition outcomes in post-Green Revolution Bangladesh

Cross-posted from the IFPRI website written by Rebecca Sullivan

While gains in agricultural productivity and poverty reduction achieved during the Green Revolution have been widely recognized, little is known of how these shifts in practice and production impacted the nutritional status of individuals in these countries, particularly women and children.

The mix of policies to promote inputs such as irrigation and fertilizers, in conjunction with high-yield varieties of rice, wheat, and maize—known collectively as the Green Revolution—helped Asia to scale up food production dramatically over the last 40 years.

Although Bangladesh was a late adopter of many Green Revolution technologies, rice yields in the country increased by approximately 150 percent and wheat by approximately 250 percent since the 1960s, according to the FAO. The observed agricultural growth has been astonishing; however, substantial information gaps exist about how this growth has influenced the nutritional status of those in Bangladesh.

In their discussion paper, Agriculture, Nutrition, and the Green Revolution in Bangladesh, IFPRI senior researcher Derek Headey and colleague John Hoddinott take a closer look at the linkages between agriculture and nutrition in Bangladesh.

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