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(represented by the Embassy of Switzerland in Bangladesh)
Agriculture plays a pivotal role in Bangladesh's economy, but it is threatened by aggravating natural hazards induced by climate change (such as floods, cyclones, and etc.) that lead to significant losses in agricultural production. The consequences of this extend to the livelihoods of Micro, Small & Medium Enterprises (MSMEs) and smallholder farmers, which leads to further implications in sustaining income generation, food security, and poverty reduction.
Bangladesh is the seventh most climate change-vulnerable country in the world and ranks fifth in terms of economic losses due to climate change, which in the past 20 years (2000-2019) totalled USD 3.72 billion. Around 56% of Bangladesh’s population (90 million) live in “high climate exposure areas,” with 53 million subjected to “very high” exposure.
One of the key tools that can support climate-resilient agriculture is insurance – as a mechanism to transfer and mitigate the risks associated with climate change. Globally microinsurance has proved to be an effective instrument for managing climate-induced vulnerability of the farmers and, in turn, for the countries.
Recognizing the potential of microinsurance to mitigate these challenges, the Swiss Agency for Development and Cooperation (SDC) initiated the Bangladesh Microinsurance Market Development Project (BMMDP) in 2017 and continued till 2023.
In Phase-1, BMMDP envisioned the availability and offering of appropriate products for index-based crop insurance by primary insurance companies, the identification of a commercially viable livestock insurance model with risk mitigation and risk transfer mechanisms for microfinance beneficiaries, and the development of sector capacity in agricultural microinsurance. Phase-1 of the project successfully introduced commercially viable insurance products to support farmers, surpassing all possible targets.
BMMDP Phase-2 (branded as Surokkha) will specifically target crops, fisheries, and livestock in the agriculture sector. The project will design and implement interventions in the below mentioned intervention areas:
To achieve the project’s goals and battle the challenges, BMMDP Phase-2 will adopt a more comprehensive approach, prioritizing enhancements in policy, product, and support service market development and the generation of widespread awareness. The second phase will employ a combination of innovative tools to attract partners and co-investors. By doing so, it aims to catalyse the growth of the microinsurance sector, thereby enhancing resilience to climatic shocks in the agriculture sector.
Technical Assistance (TA): BMMDP will provide necessary technical support to (a) create a conducive regulatory environment for the Microinsurance sector, (b) facilitate a climate-sensitive and client-centric microinsurance support service market, and (c) Facilitate behaviour change among the target audience about microinsurance service.
Innovation Fund: The Innovation Fund will be a co-financing modality to trigger competition among private sector partners. Experience from Phase-1 indicates that there is sufficient interest in the market for this instrument. This innovation fund will require the grantees to share a certain part of the intervention/project cost. Usually, the grantees share 50% of the intervention/project cost of which at least 50% (25% of total project cost) is cash contribution.
De-risking Fund (or Climate Risk-Resilience Fund CRRF): The CRRF provision will be tested to encourage the country’s main re-insurer (SBC) to provide reinsurance support to innovative climate-resilient products/services and sub-sectors where historical loss data is not available. Partial guarantee funds where the reinsurer takes a significant amount of the risk, but has some coverage from donor funds, can help introduce reinsurers to new markets/sectors. Expert legal assistance will be needed to structure this fund with the right parameters; SDC will transfer the money earmarked for this fund to the MA to manage and administer for the duration of the programme. Any unused fund remaining towards the end of the programme can be used for the other intervention activities. BMMDP Phase-2 will monitor usage and impact of this fund on a regular basis.
Phase 1 (2017 - 2023)
However, the success also outlined that a broader approach was needed to address systemic constraints within the microinsurance sector to achieve all project goals properly. Thus, to meet this need, BMMDP Phase-2 was developed.
Based on the promising achievements in Phase-1, BMMDP Phase-2 targets include: