Jun 9, 2009

Micro-insurance -- another deceptive channel aimed at selling costly farm inputs

I fail to understand. Why do some of the better sounding initiatives, which seem to be addressing the livelihood concerns of the poor, including farmers, eventually end up selling consumer goods and/or agricultural inputs? Why do such projects/programmes have to turn into a marketing channel? And that too for unwanted farm inputs and technologies, which ultimately ends up doing more damage not only by way of introducing unsustainable farming practices but also fleecing farmers in the name of capacity building.

It happened earlier with self-help groups (SHGs). What was conceived as an apparently wonderful initiative, aimed at building up entrepreneurship amongst the poorest of the poor women, finally turned out to be a marketing chain for selling consumer products. Micro-finance too followed the same route. In Bangladesh, micro-finance is invariably tied with the sale of pesticides, hybrid seeds and costly but unwanted farm equipments.

Look at this latest initiative. Micro-insurance is being pushed not only as an insurance against bad weather and resulting crop failure, but also is being promoted in the name of climate change adaptive measures for small farmers in Asia, Africa and Latin America. I haven't yet studied it in detail, but what caught my eye when I read the news report pasted below was the statement:  as well as insuring against crop failure, the scheme also helps farmers access larger loans to pay for seeds and equipments, Leftley said, citing previous trials that saw banks lend 15-40 per cent more to farmers who have insurance.

Hope you got my point. The micro-insurance scheme will insure farmers with one hand, and take back whatever he saves in the name of resulting crop security by forcing him (by tying easy bank loans with input dealers) to buy unwanted and expensive inputs and technologies. I wouldn't be surprised if the sales of hybrid seeds, GM seeds, pesticides and fertilisers now get a boost in Kolhapur district of Maharashtra where the scheme is being introduced.

Intensive farming only acerbates global warming. All the inputs that the farmers will buy with increased bank loans will only end up adding to greenhouse gas emissions. Let us not be befooled therefore in accepting micro-finance as a central component of climate change adaptation measures.

Indian farmers to insure themselves against climate change crop failures.

UN negotiators at Bonn consider micro-insurance schemes among daptation measures for Africa, Asia and Latin America

James Murray

Monday 8 June 2009 10.58 BST

For more than half a million farmers in rural India the age old fear of crops failing due to bad weather could soon be banished, thanks to an innovative insurance scheme that UN negotiators gathering in Bonn
this week are considering as a central component of climate change adaptation measures in Africa, Asia and Latin America.

Following a successful trial last month, MicroEnsure, a company specialising in providing insurance to poor communities, plans to launch a scheme next year for up to 600,000 farmers in India's Kolhapur province allowing them to insure against their rice crops failing due to drought or heavy rains during the plants' flowering period.

Chief executive Richard Leftley said micro-insurance policies — so -called because of their relatively low premiums — will be offered to farmers with loans from the local Kolhapur District Cooperative Bank.

The firm will then pay out to farmers when weather stations show crops are likely to have been damaged by rain or drought, making it possible for smallholders to support their families and continue loan
repayments even when crops fail.

The scheme, which is receiving funding from the Bill and Melinda Gates Foundation, will be promoted using comic books designed to explain visually how insurance works to farmers who have previously had no
access to insurance cover. It will also be supported by finance from the Indian government that will effectively halve the price of premiums to around 2.5% of the value of the loan.

Leftley is anticipating huge demand from farmers in the region. "We ran a pilot scheme last month for 5,000 farmers and it sold out in two days," he said, adding that after similarly successful trials in Malawi, Ethiopia and the Philippines the company was now looking to rove micro-insurance schemes could work on a large scale.

As well as insuring against crop failure, the scheme also helps farmers access larger loans to pay for seeds and equipment, Leftley said, citing previous trials that saw banks lend 15% to 40% more to farmers who have insurance.

MicroEnsure's plans come as delegates at this week's UN climate change talks in Bonn debate whether rich countries should provide financial support to the fledgling sector. The official negotiating text [pdf], which forms the basis of an international climate change deal that is expected to be finalised in Copenhagen later this year, includes proposals to support micro-insurance projects.

Read the full report at: http://www.guardian.co.uk/environment/2009/jun/08/farming-india

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