Microinsurance: A lifeline for female farmers

Equipping them with the knowledge and confidence to understand and utilise micro insurance effectively, can transform the lives of women farmers in Bangladesh. Photo: TBS

In the face of natural disasters, a brutal truth emerges: pre-existing gender inequalities morph into gaping vulnerabilities. The very forces that level the playing field for all expose the stark reality: women farmers, already burdened, bear a disproportionate weight in the tragic aftermath.

Often lacking land ownership and facing social barriers that limit access to traditional financial services, these women farmers struggle to recover from losses. They are always vulnerable to the ever-present threat of agricultural risks like droughts, floods, and pest infestations. Additional losses can include extreme poverty, early marriage and pregnancy, and limited access to education, information, and resources compared to men.

Though the exact number isn't available, a significant portion of the increased female rural workforce (around 50.89%) likely contributes to agriculture in Bangladesh. A visit to rural regions during harvest or planting unveils the true essence of life there. Women farmers, working side-by-side with men, form the backbone of this agricultural landscape.

However, a glimmer of hope emerges in the form of microinsurance. Microfinance has become a familiar term, empowering people with financial tools. But what about microinsurance? Think of it as the umbrella that complements this toolbox. Just as an umbrella shields you from the rain, microinsurance protects against unexpected financial storms. It is a low-cost insurance product tailored for low-income individuals and offers crucial protection against agricultural risks that can devastate livelihoods.

Traditionally excluded from financial services due to limited land ownership and social barriers, women farmers face unique challenges. Microinsurance provides financial safety nets in case of any natural disaster. This not only mitigates financial shocks but also empowers women to take risks, invest in better farming practices, and increase their incomes.

By ensuring women's participation in design and distribution and offering clear communication materials, microinsurance can become a powerful tool for financial inclusion, resilience, and growth in Bangladesh's agricultural sector.

With affordable premiums and simplified processes, microinsurance empowers women farmers to weather agricultural storms. It is an innovative financial product, emerging as a necessity for smallholders now. In the event of a crop failure due to drought or livestock death from disease, microinsurance payouts can help them recover losses and continue farming. This financial security translates into increased resilience, allowing them to invest in better seeds, fertilisers, and irrigation, ultimately leading to higher yields and improved income.

For example, MicroEnsure, a global microinsurance provider backed by the International Finance Corporation and global insurance company AXA Group, has partnered with local organisations and microfinance institutions in Bangladesh to deliver innovative insurance solutions to underserved communities.

Through these partnerships, MicroEnsure introduced weather-indexed insurance products tailored to the needs of farmers and smallholder agricultural workers. Similar insurance products help protect farmers against crop losses due to adverse weather conditions, ensuring their financial stability and food security.

Most microinsurance products are index-based. Index-based microinsurance products are insurance policies designed to provide coverage to low-income individuals or communities against specific risks, such as crop failure, natural disasters, or other events that can be objectively measured by an index.

Rather than relying on individual claims assessments, which can be costly and difficult to administer in areas with limited infrastructure, index-based microinsurance products use predefined triggers based on observable indices, such as weather patterns, rainfall levels, or crop yields. When these triggers are met, policyholders receive compensation automatically without the need for extensive claim processing.

While many index-based insurance products haven't explicitly addressed gender (IFPRI), the reality in Bangladesh is different. There's a misconception that women are less involved in agriculture, making them less interested in agricultural insurance. However, data from the Microcredit Regulatory Authority (MRA) reveals that women are the vast majority (around 90%) of microfinance borrowers.

This highlights their significant role in agriculture. Beyond financial protection, microinsurance empowers women by enabling them to take calculated risks in their agricultural practices. This newfound confidence can translate to increased household bargaining power and a greater role in decision-making.

The success of microinsurance relies on its gender-sensitive design. Products should be tailored to the specific needs of women farmers, with clear communication materials and distribution channels that encourage their participation. To make microinsurance more accessible for women farmers with lower and fluctuating incomes, premiums can be offered in smaller, more frequent instalments.

Additionally, these payments could be linked directly to the value of their harvests or livestock sales, creating a more manageable financial commitment. Local women's groups play a crucial role in this process by educating women farmers about the product, simplifying enrollment procedures, ensuring a comfortable claims process, and fostering trust and participation.

By equipping them with the knowledge and confidence to understand and utilise micro insurance effectively, we can unlock its full potential to transform the lives of women farmers in Bangladesh. In essence, microinsurance becomes a shield, protecting women farmers from the harsh realities of agricultural risks and empowering them to become more resilient, productive, and vital contributors to Bangladesh's food security.

Raisa Adiba is a development practitioner and social scientist with 6+ years of experience.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.