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Grantee
DHAN Foundation, an Indian-based professional development organisation founded in 1997, aims at enhancing rural development innovations and scaling up interventions to eradicate poverty in vast areas of the country. It engages in various activities, such as microfinance, water, rainfed agriculture development, ICT for Development, local governance, coastal conservation and livelihood development. Microinsurance is a cross cutting topic in the Foundation’s work.
People Mutuals, a community association, is the insurance arm of Dhan Foundation. It was set up in 2003 with the support of Oxfam Novib and Rabobank Foundation, to facilitate access to microinsurance among the members of self help groups and other peoples’ organizations supported by DHAN Foundation. Its mission is to help safeguard low-income people from risks and vulnerabilities through mutual solutions and collaboration with insurance providers.
Project Summary
- Project name: Evolving Climatic Adaptation through Crop Insurance
- Project start date: June 2009
- Duration: 3 Years
- Country: India
Beneficiaries
The project targets small farmers organized by DHAN Foundation who do not have access to insurance mechanisms for adapting to climate change related issues. The Tankfed Agriculture Development Program and Rainfed Farming Development Program of DHAN Foundation have a reach of over 100,000 small farmers. These farmers, especially rainfed farmers, face various risks to their livelihood. Weather risks are the primary concern as more than 60 to 80 percent of crop yield depends on the adequate quantity and proper distribution of rainfall. In the past decade, farmers have faced many issues arising from climate change, including a decline in annual rainfall, late onset and early withdrawal of monsoon, and a change in dry spell patterns. The consequences of these changes can be dramatic and include frequent crop losses (and associated loss of income), migration and change of vocation. The traditional coping mechanisms such as savings or credit are not sufficient to manage these issues; they also are not available to all. The farmers, however, do not understand insurance well or lack a culture of risk management. Most farmers equate payment of premium to saving and expect something in return. Their landholding is fragmented and their income is low. They do not have access to existing commercial insurance companies’ crop insurance products and services which meet their needs.
The pilot will begin in five federations the first year, scaling up to 15 federations in Year 2 to serve a total of 22,000 small farmers.
Project Description
The project aims to use weather indexed crop insurance as a tool to adapt to climate change. Farmers organized as self-help federations under People Mutuals will act as risk carriers, with a risk transfer mechanism from Eureko Re, and will develop location-specific crop insurance products.
To stimulate demand and build capacity, farmers will be trained on climate change, drought and water management issues. Farmer federations will develop, through Mutual Insurance Committees (MICs), a mutual solution for specialized, localized crop insurance needs. Although the products are envisioned to cover various crops, soil and climatic conditions, the model is designed to be replicated.
Existing weather stations are 20-200 kilometres apart, creating unacceptably high basis risk. As part of the project, local rain gauges will be installed to create greater precision (covering as low as a 5 km radius). A study, supported by the Facility and technical assistance experts at the World Food Programme, will be conducted to optimize (and measure the cost-benefit of) the placement and number of rain gauges.
Key Challenges
- Creating affordable products which provide adequate protection, and which include mechanisms – such as building of reserves, pooling of risk, and reinsurance or other support to cover infrequent but catastrophic risks – that promote sustainability
- Rural areas may experience conflicts arising out of the differences of caste, creed and religion that can impede the project implementation. The social capital built through the community organisations helps to address this issue.
Learning Agenda
- How to insure different crops and determine the probability of individual crop risks, determine loss associated with individual risks, and affordability?
- What factors determine the efficiency and effectiveness of crop insurance programmes? Specifically, how to control adverse selection and moral hazard and maximize member enrolment and retention?
- How to optimize the placement and number of automatic rain gauges, and ensure that the rainfall recorded in the rain gauges is accurate, reliable and representative of field conditions?
More information on the project
Website of the grantee:
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