Published : 26 October 2026
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Updated : 26 October 2026, 12:55
Swarupam Barua
A farmer who loses a crop while the index pays nothing is unlikely to renew. FILE PHOTO: MOSTAFA SHABUJ
On March 18, Agriculture Minister Amin Ur Rashid said at a rice distribution event in Cumilla that farmers whose crops are lost to floods or other disasters will be compensated through insurance. On May 8, State Minister for Power, Energy and Mineral Resources Aninda Islam Amit reiterated the pledge while inaugurating the government’s Boro paddy procurement drive for the current season. The Farmers Card, which lists agricultural insurance among its 10 promised benefits, is supposed to carry this insurance.
There is no information yet on who will pay the premium, what will trigger a payout, who will sell the policy, or who will regulate it. That the second announcement came from a power minister at a paddy procurement event suggests that no ministry has claimed the design. But these decisions will determine whether the scheme survives or not, and Bangladesh already has a case showing how it could go wrong.
The state-owned Sadharan Bima Corporation (SBC) ran a crop insurance scheme from 1977 to 1995. It insured 18,782 farmers in all and claims averaged 508 percent of premiums a year. Premium rates were capped at 3 to 5 percent, below what the risk required, and the scheme had no government subsidy and no reinsurance. SBC carried the losses itself and suspended the scheme in 1995. Weak demand played a part, but design may be the bigger cause since a product priced below cost would have struggled even with willing buyers.
The pilots since then show that delivery is possible. In 2014, SBC and the Asian Development Bank enrolled at least 9,641 policyholders in Rajshahi, Sirajganj, and Noakhali, backed by 20 weather stations and a 50-percent premium subsidy. Green Delta Insurance has gone further, as its weather-index programmes grew from 215 farmers in 2015 to 15.3 lakh in 35 districts by 2025, with about Tk 18.8 crore paid to 3,36,000 claimants.
If those numbers hold, delivery would no longer be a weak point. What is still missing is public backing, that is, a legal basis for index cover and premium support for farmers who cannot pay. Trust is a second gap, because a farmer who loses a crop while the index pays nothing is unlikely to renew.
The first question is about who pays. According to the Finance Division, revenue collection by the National Board of Revenue (NBR) was only 6.78 percent of GDP, while expenditure stood at 11.33 percent at the end of last year. India has shown how the bill grows, since its crop insurance scheme cost the government roughly 25,000 to 30,000 crore Indian rupees a year in 2022-24, or about $2.6 billion to $3.1 billion as per the current rate, and several states, including Bihar, Jharkhand, and West Bengal, have opted out of the scheme.
My view is that premium support should go to the poorest farmers only, with an end date and with the budget naming where the money comes from. The trigger decides whether farmers believe in the product or not. An index pays on rainfall or river levels, and what it records can differ from what happened in a farmer’s field.
The 2014 pilot relied on 20 weather stations across three districts. In a choice experiment on one coastal island, most farmers were averse to insurance, and those who did choose cover preferred physical verification of losses to an index. The study dates from 2017 and covers one island, so it is a warning, not a verdict. Farmers who distrust the trigger may not renew.
The study of the aforementioned ADB pilot found a higher uptake of crop insurance schemes by farmers where NGOs and microfinance institutions acted as intermediaries. At a roundtable held last year, SBC’s general manager said that regulators must clarify how microfinance institutions can legally distribute cover and be paid for it. The then chairman of the Insurance Development and Regulatory Authority (IDRA) offered one answer: a corporate agent model in which microfinance institutions and banks sell policies for a commission of up to 15 percent. Indeed, a generous commission would push premiums up and cancel part of any subsidy.
Of course, the law is yet to catch up. The same IDRA chairman said parametric cover falls outside the current indemnity-based insurance law and that the Insurance Act is being amended. Microfinance institutions answer to a different regulator, the Microcredit Regulatory Authority, so cover sold through them can fall between two rulebooks. The World Bank said in 2018 that the legal, regulatory and supervisory environment would need strengthening before any scheme. The government has not said whether its cover will be parametric. If it is, the amendment is what I would watch, because until it passes the scheme has no clear legal footing.
The obvious objection is cost. Reportedly, the agriculture ministry has shown reluctance regarding index cover, citing undue claims and existing subsidies. Waiving VAT on premiums has been proposed since 2022. Green Delta says dropping the 15 percent tax could widen cover, and a UNDP official said at the abovementioned roundtable it would cost revenue. These are fair points, and they are reasons to name a payer. Donors cannot be the plan, since the then IDRA chairman advised after COP30 last year that Bangladesh should expect to rely on its own resources. The recent pledge suggests the ministry’s view has shifted, and it should say so.
The Ministry of Agriculture should publish a design note that answers the four questions by December 15, before Boro planting gathers pace. The Finance Division should show a premium-support line, with an end date, in the budget due in June 2027. Lastly, the IDRA should publish a timetable for the Insurance Act amendment by November 30. Without those answers, the pledge may only be a repetition of the 1977 venture, with better technology and the same arithmetic.
Swarupam Barua is an economics research professional working on climate finance, monitoring, evaluation and learning (MEL), and socioeconomic data analysis in Bangladesh.
Views expressed in this article are the author's own.
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