Crop insurance a hope for small landholders

ISLAMABAD:  Almost 61% of people in Pakistan live in rural areas even without having adequate landholdings and sufficient financial resources for agriculture to earn their livelihood. With low level of income, they are plunging into abject poverty.

Challenges such as uncertain weather conditions (floods and droughts), leading to crop failure or loss, insecure land ownership limiting farmers’ propensity to invest, restricted access to capital and farm inputs such as fertiliser and seeds, unfavourable trade policies and price fluctuations hurt their sustainability and sometimes subsistence levels.

Many of these constraints are beyond their control as they have to depend on climatic conditions, government policies and market players.

Millions to go into improving nutritive value of crops

On the other hand, their current risk management mainly consists of diversifying agricultural activities by altering crop variety, early sowing of crops and cattle breeding. They have hardly any risk transfer tools, which in turn limit the availability and range of agricultural credit offered by banks.

A lack of credit availability is the main limitation. Though there are some microcredit facilities available, farmers are reluctant or unable to pay high interest rates on these microcredit opportunities.

Climate change and adaptation

It could be observed that farmers get information on climate change through radio or public awareness programmes of community groups, peers and other sources.

Majority of the farmers indicate that they have experienced higher temperatures, riverine floods, less water for irrigation and lower crop yields due to changed weather conditions over time.

Agricultural production and farm incomes in Pakistan are frequently affected by natural disasters such as droughts, floods, cyclones, storms, landslides and earthquakes.

Susceptibility of agriculture to these disasters is compounded by the outbreak of epidemics and man-made disasters such as fire, spurious seeds, fertilisers and pesticides, price crash and improper market for final product.

In the case of Pakistan, agriculture is highly affected by climate change and variability. But a big gap exists in our knowledge on the capacity of agricultural systems to adapt to climate change as its effects cannot be estimated through bio-physical impact modeling alone.

Beyond the traditional knowledge of farmers, the agriculture sector has accumulated complex systems of knowledge through research, extension services and innovation involving government, civic and market institutions.

Scientists work to enhance crop value

The capacity of a household to cope with climate risks depends to some degree on the enabling environment and the adaptive capacity of the community is reflective of the resources and processes of the region.

When we asked a select group of small farmers to identify the best measures needed to enhance effective adaptation to climate variability, they pointed to the provision of subsidies on farm inputs, updated information services (through the extension department) and sufficient irrigation water supply as necessary measures.

A farmer from Muzaffargarh said: “Government has to work to make sure continuous provision of water for irrigation along with good-quality seeds, pesticides and fertilisers for the farmers at reasonable prices.”

Another farmer said: “There is no ‘mandi’ (local market) close to our area and we have to go to Multan and it is difficult for us to bear the transportation cost. That’s why we are bound to sell our crops to the middlemen at low prices.”


Access to credit provides financial resources to the farmers for buying crop inputs and accelerates the pace of adoption of new technologies.

The credit access has the potential to help farmers in smooth adaptation to climate change, if funds are available at a low interest rate. These will allow farmers to set aside sufficient resources for crop production, which will ultimately help in repaying loans.

In Pakistan, only 30% of farmers are getting benefits from the agricultural loan schemes. Majority of the farmers (84%) are small landholders who rely on informal sector credit at exorbitant interest rates to meet their requirements as they are unable to provide collateral to banks.

Furthermore, in case of crop failure, it is difficult for the farmers to pay back their loans. They have to either sell their cattle and other farm assets or again acquire a loan to pay the previous one.

When asked about this situation, a farmer said: “We recover our crop loss by either selling our land, livestock or relying on loans with a heavy interest rate.”

Crop insurance has the potential to address some of these constraints by facilitating access to the means of production and changing behaviour by reducing uncertainty.

This coverage can enable farmers to invest in riskier but potentially more lucrative crops. Timely insurance payout after crop losses can help small landholders to maintain their consumption patterns and avoid the sale of assets.

Crop insurance appeals the most when offered alongside other services such as weather forecasts through text messages, agricultural extension services, price fluctuation and other market information which, coupled with basic agricultural advice such as planting dates for crops, are considered highly valuable to small holders.

‘New techniques will enhance crop productivity’  

Currently, the Crop Loan Insurance offered in Pakistan is linked with agricultural loans from banks and the scheme can only be accessed by 30% of the farmers who are able to secure bank loans.

Small farmers are willing to get their crops insured if any crop insurance scheme is launched for them and the government is willing to share some portion of the premium.

A farmer highlighted the importance of crop insurance, saying: “We live in an uncertain condition as we are not sure about our crops whether or not they will benefit us; if we get insured, it will help us to shift our loss/damage when our insurance claims are paid.”

In order to provide crop insurance, there is a need to win the confidence of farmers by educating them about the pros and cons of the scheme and how it works, providing them proper assistance and assurance regarding timely payments of their claims.

Source Express Tribune

By MUHAMMAD AWAIS UMAR, The writer is a project assistant at the Sustainable Development Policy Institute