Organized Financial Inclusion for Farmers: Crop Insurance

Crop insurance in Pakistan at the national level has not expanded beyond the State Bank of Pakistan’s (SBP) Crop Loan Insurance Program (CLIS) which provides protection only in the case of major catastrophe. In order to provide adequate protection to growers, comprehensive, data driven crop insurance products need to be developed which complement the existing scheme.

With the increase in the frequency of climate events, Pakistan Agricultural Coalition has teamed up with local and international partners to develop a reliable crop insurance solution for Pakistan’s small farmers using 21st-century tools: satellite imaging and rapid data collection directly from farms. PAC successfully piloted this solution during the last wheat season (2021-22) by insuring farmer loans of HBL and Bank of Punjab which led to insurance payments for farmers affected by the heatwave of 2022 (none of the other insurance schemes yielded payouts for farmers on account of the heatwave).

Global re-insurer SCOR of France was PAC’s partner along with insuretech firm Pula Advisors of Switzerland and TPL insurance on the local front. In the aftermath of the historic floods of 2022, the aim is to massively increase the footprint of these solution to tens of thousands of Pakistan’s small farmers. Since smallholder farmers cannot afford the insurance premium for this reliable service, governments provide support to farmers to secure these solutions and for this, PAC is engaging with the relevant decision-makers in the federal and provincial governments of Punjab and Sindh, donor institutions such as the World Bank, and financial houses (banks and insurers), to support adoption and scale-up of this approach to crop insurance.