Bangladesh : Agricultural Insurance Solutions Appraisal Technical Report
Agriculture is a key sector in Bangladesh, but it is highly exposed to risks. While agriculture is a source of employment and livelihood for nearly one in two adults in Bangladesh and contributes about 16 percent to GDP, it is highly exposed to nat...
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| Format: | Report |
| Language: | English |
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World Bank, Washington, DC
2018
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| Online Access: | http://documents.worldbank.org/curated/en/418491545057956149/Bangladesh-Agricultural-Insurance-Solutions-Appraisal-Technical-Report http://hdl.handle.net/10986/31038 |
| Summary: | Agriculture is a key sector in
Bangladesh, but it is highly exposed to risks. While
agriculture is a source of employment and livelihood for
nearly one in two adults in Bangladesh and contributes about
16 percent to GDP, it is highly exposed to natural hazards.
Indeed, Bangladesh is commonly ranked as one of the most
vulnerable countries in the world to natural disasters with
agriculture heavily exposed to floods, cyclones, and
drought. In 2007, for instance, Cyclone Sidr destroyed 0.69
million ha of cultivated crop lands and killed over 460,000
head of livestock and poultry.In the past, the government of
Bangladesh and development partners have provided
substantialsupport to farmers in the aftermath of large
disasters, but this approach has disadvantages in that
support is not guaranteed to farmers and may be slow. In the
aftermath of Cyclone Sidr,recovery and reconstruction needs
were estimated at USD 1.3 billion, or 28 percent of
governmentexpenditures. In spite of efforts by the
government of Bangladesh, the gap between available funding
and needs is often large and can reach more than USD 1.5
billion in bad years (Air Worldwide and ADPC 2014).
Bangladesh often relies on international assistance, as over
the past ten years, only 33 percent of disaster-related
expenses has been met by domestic resources. In addition,
disaster relief transfers often take substantial time to
reach beneficiaries and require to divert resources away
from long term development projects. Agricultural insurance
offers the government a planned, fast, ex ante alternative
to ad hoc disaster response, one that (1) reduces the ex
post fiscal burden on the government, (2) improves farmers’
resilience to shocks, and (3) supports the expansion of
agricultural credit. Every five years on average in
Bangladesh, production shocks lead to a drop of up to 50
percent in crop income available for consumption in average
rural households. This drop pushes many small- and medium-
scale farmers into poverty. Although many Bangladeshi
farmers can access credit, their exposure to risks makes
formal financial institutions reluctant to lend to them, so
that most farmers borrow from informal lenders at average
annual interest rates ranging from 19 percent to 30 percent.
Agricultural insurance transfers risk away from farmers, and
therefore benefits financial institutions and the government
of Bangladesh as well as the farmers themselves. |
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