Crop Insurance: An inevitable tool for developing resilience against flood-driven crop loss

Bangladesh, a small country in South Asia, has a huge population of around 173 million as reported by UNFPA. Of this huge population, around 68 percent lies in the group of 15 to 64 years old (UNFPA, 2023). The major source of income for a large share of the population still depends on agriculture, despite having garment exports, shrimp exports, remittances from people working abroad, etc. The agricultural sector contributed about 11.66% of the Gross Domestic Product (GDP) of Bangladesh for the fiscal year 2021–22. In addition to that, the provisional report of the Quarterly Labour Force Survey 2022 showed that the agricultural sector accommodated around 45.33% of the total labour force in Bangladesh (BBS, 2022). When the country faces any disaster, either man-made or natural, the sector that faces the most devastation is agriculture. And when any component of the agriculture sector is disturbed, the country’s whole economy is shaken and is at a great loss. This loss is detrimental to the growth of such a tiny country with a huge population. The loss is even the greatest to the small and marginal farmers who lead their lives with the earning of the seasonal produce that they grow seasonally. They sometimes lose their last asset which they invest in crops.

Bangladesh has one of the biggest active deltas in the world, with an area of about 1,47,570 sq-km, Bangladesh lies in a sub-tropical monsoon climate. The Bay of Bengal is in the south, and Myanmar borders part of the south-eastern area. Including 57 transboundary rivers, among which 54 originated from India including three major rivers the Ganges, the Brahmaputra and the Meghna Bangladesh has 405 rivers (Annual Flood Report 2020, FFWC). Three rivers originated in Myanmar. Monsoon flood inundation of about 20% to 25% area of the country is assumed to be beneficial for crops, ecology and the environment. As mentioned before, the low-lying geographic and gangetic location has both benefits and disadvantages for Bangladesh’s agriculture. The rivers carry slits from upstream, making the land fertile after the floods. When the drought prolongs, the standing crops get washed away and devastated, resulting in a shortage of crops, the loss of human life, poultry, cattle, infrastructure, etc. putting unimaginable pressure on the economy. History has shown it so many times that Bangladesh is already infamous for being hit by floods every year.

A recent report found that there were 78 floods from 1971 to 2014, which cost 41,783 human lives. Even if the global emission level is decreased, the flood condition will still rise to at least 16% compared to that of the period from 1971 to 2000 (The Daily Star, 2023). Another popular daily in Bangladesh recently published an article bringing a lot of in-depth information about recent events in Bangladesh. According to the report, floods submerge around 20–25% of the land area every year. During extreme floods, around 55–60% of the land of Bangladesh gets submerged causing damage to billions of dollars and affecting millions of people. In addition to that, this situation has very little chance of being improved since river flow could increase 36% by 2077 to 2099 as projected by researchers. Between the years 1971 and 2014, 78 floods caused the deaths of 41,783 people and total economic damage of $12.2 billion, mainly through damage to crops and property, exacerbated by a lack of insurance, as reported by the same daily. Dhaka Tribune also reported that the Asian Development Bank (ADB) estimated that flood-related damages cost the Bangladesh economy approximately $2.2 billion equivalent to 1.5% of its GDP only in the year 2014. The report finally shows that floods in the year 2022 are estimated to have cost the country $1 billion and affected 7.3 million people (Dhaka Tribune, 2023). Heavy rain and a flash flood in August 2023 damaged crops on over 50,000 hectares of land in Chattogram, Cox’s Bazar, Feni and Lakshmipur under the Chattogram region of the Department of Agricultural Extension. In addition to that, the recent flood in August 2023 was the worst in living memory for the people in Chattogram, Cox’s Bazar and the three hill tract districts damaged worth Tk 7 billion, with Bandarban suffered the most devastation, with damage to crops to the tune of Tk 3.1 billion, according to agriculture official reports (BDNews, 2023). The following map was prepared by the Flood Forecast and Warning Centre (FFWC) of the Bangladesh Water Development Board (BWDB) in July 2020. As per the IPCC, around 850,000 households and 250,000 hectares of harvestable land were lost in climate-induced disasters and the loss of agricultural land also resulted in crop failure that increased the price of rice by 30% between 2014 and 2021 (ICCAD, 2022). This also impacted the economy of Bangladesh to a great extent.

Crop insurance is a risk management tool available to farmers and ranchers to protect their investments against declines in crop yields and/or revenue. In the US, crop insurance is divided into two categories: federally subsidised multiple-peril crop insurance and state-regulated private crop insurance. Over $14 million in premiums were written for multiple-peril crop insurance, and over $1.2 million in premiums were written for private crop insurance in the year 2021 (NAIC, 2023). This can be an example to teach us the importance of crop insurance. Prome et. al. (2023) reported that farmers are willing to pay (WTP) for certain crops’ insurance. They showed that several factors are involved in the decision-making processes of the farmers. Khan and Hasan (2022) revealed that variables including education, opportunity of extension education, awareness of crop insurance, perception of risk, risk experience, and monthly income positively influence farmers’ adoption of crop insurance. Another study by Hasan (2019) reported the importance of crop insurance for helping the farmers of developing and underdeveloped countries to initiate production activities after a bad agricultural period. He also reported that Green Delta Insurance Company started Weather Index Insurance in Bangladesh in 2015 by supporting of World Bank group in Bangladesh. Following them, Sadharan Bima Corporation (SBC), a state-run insurance company in Bangladesh, also proposed another new project named ‘Weather Index-Based Crop Insurance (WIBCI)’.

It is evident that how every year farmers are losing their investments because of repeated and unpredictable environmental hazards due to climate change and man-made reasons. If this continues for a few more years, the number of farmers is sure to decline drastically by moving to other sectors as sources of income. The situation will surely worsen if seed crop growers move away from the seed production sector. The farmers' numbers will shrink and crop production decreases, people will have to pay more money for the same agricultural commodities than they paid before creating huge pressure on the economy of the country. In the following years, the price of seed in the market will only skyrocket. To minimise the economic pressure and make the commodities abundant, the government must import from the surplus countries by spending foreign exchange, which is in no way a better idea than motivating the farmers to develop resilience and continue their efforts towards the country with some support. Now the question arises: How to mitigate the effect in this vulnerable economic state of the country and develop resilience against flood-driven crop loss of the farmers? The answer has no other options than crop insurance. Crop insurance is one such tool that can pull farmers of all crops including BADC seed producers, to keep their wheel on for the greater interest of the country as well as secure their investments after a bad harvest. It is high time that the government of Bangladesh took crop insurance-related issues seriously and formulated necessary strategies and action plans so that the farmers and seed producers continue their contribution towards sustainable agriculture in Bangladesh so that crop insurance can work as an inevitable tool for developing resilience against flood-driven crop loss among the small and marginal farmers.

The writer is the Deputy Director (C. G.) BADC, Chattogram.