Vijayasekar Kalavakonda, GIIF Senior Financial Sector Specialist, talks about current GIIF's activity in Pakistan.

Could you please tell us about what the Global Index Insurance Facility is doing in Pakistan?

The “Punjab Agriculture and Rural Transformation Project" is currently under implementation after it was approved in December 2017.  Led by the World Bank Group’s Agriculture Practice, the project aims at increasing the productivity of crop and livestock farmers, improving their climate resilience, and fostering agribusiness development in the Punjab Province of Pakistan. Global Index Insurance Facility’s involvement is pertaining to the program’s element around agriculture insurance. The Project kicked-off with a small pilot for the “Kharif” cropping (summer crops in March-October) and will be followed by the “Rabi” cropping season (winter crops in October-March). During this pilot, we are observing how implementing agencies, led by the Department of Agriculture, are going to function, especially their role in assessing crop yields and conducting crop reporting. We are also testing how insurance companies are readying themselves to underwrite agriculture insurance and the financial institutions to bundle insurance with the credit system in response to consumer demand. We want to monitor and evaluate all these different elements, through an insurance portal for stakeholders that we developed, before moving on to the next stage which will scale up the project.

Another rationale behind prudent observation of the pilot concerns with budgetary implications. Based on initial data, we will project overall operations cost as well as how much it would cost the Government of Punjab if there were to be subsidies. These numbers could then be captured and reflected as part of a proposed annual budget of the authorities. 

How big is the size of the beneficiaries or people who participate in the pilot phase?

The pilot’s primary objective is not about the number of farmers but more about creating an understanding of what the population would like to benefit from agriculture insurance. We are observing the level of understanding of insurance as well as the challenges the farmer consumers face in going about their profession. That said, around 50,000–60,000 farmers have enrolled as part of the pilot program. Insured crops are limited to rice and cotton in a few sub-districts of four districts in Punjab.

If the pilot is proved to be successful, how many beneficiaries are projected to benefit from the program, say in five years from now?

The goal is by 2022–23 crop season - that is Rabi crop season – we will be able to reach a steady state in terms of the number of farmers covered, insured, of close to about 3.5 million farmers. This does not include the beneficiaries, which could be multiplied in many folds.

Concerning the two crops that are being piloted right now, what are the types of perils that the farmers are facing? 

One thing that we need to keep in mind is that the Province of Punjab is a well-irrigated area. Major risks, thus, differ from crop to crop. For instance, cotton is vulnerable to pest and diseases. Flood risks are more pertinent to rice, especially in the context of large irrigation and canal irrigation systems. In some area, hail is very common. We can say that risks are more localized, depending on each area’s geographical features, thus they are not systemic like inundation or drought we see in some countries. 

Any challenges you have observed so far?

Like any other agricultural insurance programs that we develop in many countries, the program in Punjab faces a typical set of challenges. First, insurance companies have little technical know-how and capacity to underwrite area yield index insurance products that seek to primarily protect individual farmers. Appropriate design and pricing is always a concern. Second, there is an ongoing insurance program in Pakistan, called Crop Loan Insurance Scheme (CLIS), which is a federal program supported by the federal government. It is fully subsidized and paid for by the authorities in term of premiums and designed to protect the financial institutions that are lending to farmers and crop growers. Now that we are coming on with a new program. It is vital to find out how the two programs are going to be working with each other?  Are they going to cause confusion or are they complementing each other? Also, we do not want to have a situation where farmers could get claims for the same losses from two different products.

The third is to build capacity within the Department of Agriculture and its Crop Report Service (CRS) to undertake accurate and timely crop yield assessments. Their service should ensure trust and transparency of the yield data, on which insurance claims are going to be settled by the private sector. Other challenges deal with financial institutions and farmers’ awareness. Not only we must be able to explain how area yield index insurance works, but we must also decide if the product will be offered compulsorily or voluntarily. A financial institution may find it cumbersome having to explain the complexity of the product to the farmers if it is not offered automatically with a loan/credit. We also have to think through how the farmers will compare and contrast the new product with the subsidized CLIS product.

Any kind of specific activities that have conducted or planned when it comes to awareness raising?

There has been a significant amount of efforts being put in terms of raising farmer awareness – from a various media campaigns on the televisions, in the newspapers, on the radio stations to outreaches to political leaders who can help disseminate our message. Another means is to educate the population through the “training of trainers” program.  We are bringing in farmer leaders and train them on agricultural insurance. Subsequently, these trained leaders go to their local level meetings and share information about agriculture insurance to their peers.  So far, at least 13 meets have been held since we started the initiatives, with an average of around 60–80 farmer participants at each meeting.

Capacity building and knowledge sharing will be a major focus area that we will be deeply involved over the next three to four years.  It is a continuous activity, not only limited to the period of enrollment. For instance, we will have to explain to the farmers during the claim process – why some may be eligible for a payout while some not. If one doesn’t receive a payment after a claim, one may think that insurance is useless, even though in reality, many elements come into play.