The World Bank is willing to play a technical advisory role to assist the region in developing a disaster risk management strategy for the agriculture sector.
Dr Carlos Arce, Senior Economist at the World Bank, made this known last Thursday while addressing the Caribbean Agriculture Insurance Symposium on Disaster Risk Management at the Jolly Beach Resort in Antigua and Barbuda, according to a press release from the Caricom Secretariat, Turkeyen.
Arce said the region would be best advised to pursue a disaster management framework that was feasible, efficient, and transparent, and one which could be easily monitored.
The June 16-19 symposium was coordinated by the Caricom Secretariat, the Ministry of Agriculture of Antigua and Barbuda and the Inter-American Institute for Cooperation on Agriculture (IICA). The World Bank, the Caribbean Development Bank, the Food and Agriculture Organisation (FAO) of the United Nations, the Caribbean Disaster Emergency Management Agency (CDEMA) and Government of Australia Aid Programme supported the event.
Arce noted that the World Bank, within the past decade, had itself been seeking an optimal insurance strategy for agriculture that was cost effective, reached small farmers, covered a wide range of risks, and was easy to administer and operate.
In this pursuit, he said, it had found the index-insurance mechanism used in the energy sector in the United States useful.
Index insurance is a mechanism which can be used in the agriculture sector to measure the impact of weather risks, using a weather index such as rainfall to determine payouts rather than the consequence of weather variability, such as crop failure, the release explained.
Arce said that the World Bank had piloted this mechanism in South Africa, in which case farmers needed coverage for drought. He noted that the index-insurance mechanism was region-specific and at present the model that had been developed by the World Bank was limited, particularly to drought.
The economist could not say with certainty that it was the best option for the Caribbean, but added that it should be considered as part of the discourse so that decision makers can be better informed.
According to Arce, index insurance was
flexible and applicable at the micro-level to individual farmers, at the aggregated level to farmers’ organisations, and applied at the macro level with governments as the policy holder, pooling the risks of small farmers.
He said countries like India, Malawi and Nicaragua had already “tested the waters” and had recorded some success.
World Bank willing
In terms of the applicability of index insurance to the Caribbean region, the economist said the World Bank was willing to share its experience with technical experts and policy makers, to complement efforts currently underway towards the development and management of an efficient agricultural insurance scheme.
Arce said that the concept of index insurance was “very simple”, but modelling it was technically challenging and complex, and required huge technical and financial support for its implementation, including significant buy-in by the public sector for its sustainability.
They were a number of variables in the region, he noted, which would likely pose some challenges to its implementation. These included the number of varieties of agricultural crops, as each crop had varying levels of resilience to weather events, and the number of small farmers in remote areas.
In that respect, Arce pointed out that the mechanism would be more viable at the aggregate level through farmers’ ogranisations.
He suggested, however, that small farmers could be covered through a public sector initiative in which governments pool the small farmers’ risks and function as the policy holder.
The economist also explained that the diversity of the region’s agriculture sector was not a disadvantage, but is in itself a risk management strategy, as in event of disasters farmers would lose in some areas and not in others.
However, with a catastrophe, traditional farming coping mechanisms was no longer an advantage.
In that light, Arce commended the regional approach towards the mitigation of risks in the sector, adding that the World Bank would be “very happy” to help find solutions toward this end.
