The pilot microinsurance scheme aimed to build resilience among Bhutan's small and marginal farmers by reducing their financial vulnerability. It promoted awareness and education on insurance benefits, thus fostering greater acceptance and adoption. The project set the foundation for broader financial inclusion by leveraging microinsurance as a policy mechanism.
The successful implementation of the pilot is expected to inspire similar initiatives across rural Bhutan, helping farmers build a safety net against economic uncertainties. Through this project, ADB demonstrated its commitment to reducing vulnerabilities and enhancing economic stability in Bhutan’s agricultural sector.
— Bhutan —
resilience. protection. innovation.
Empowering Bhutan's Farmers through Microinsurance: An ADB Initiative
"Microinsurance is a powerful tool to reduce vulnerabilities and build resilience among small and marginal farmers." — ADB, 2020
Challenge
Bhutan’s rural economy is highly dependent on agriculture, with small and marginal farmers being particularly vulnerable to risks such as crop failure, livestock loss, and natural disasters. Despite the critical need, access to formal insurance services remains limited, leaving farmers exposed to financial shocks. Informal insurance practices, though present, lack the reliability and structure needed to adequately protect livelihoods.
The Asian Development Bank (ADB), recognizing these challenges, initiated a project in 2020 to develop microinsurance as a strategic tool to reduce vulnerabilities among small and marginal farmers. The project's aim was to provide a sustainable financial safety net through affordable insurance solutions, tailored to the specific needs of rural communities.
Strategy
To effectively address the challenge, a comprehensive diagnostic study of Bhutan's rural finance sector was conducted. This included:
- Assessing Existing Insurance Services: The study evaluated both formal and informal insurance services available to the poor and low-income populations. It examined the legal and regulatory frameworks, the institutions involved, and the outreach and effectiveness of existing products.
- Conducting Risk Analysis: The project identified specific risks faced by rural farmers, such as crop failure, livestock loss, and natural disasters. It also assessed farmers' awareness, willingness to pay, and the affordability of insurance premiums. Innovative solutions, such as remote sensing technology, were considered to enhance product viability and monitoring.
- Designing a Pilot Microinsurance Scheme: Based on the diagnostic review, a pilot microinsurance scheme was formulated. The scheme included tailored product designs, distribution strategies, payout methods, and client outreach plans. The emphasis was on affordability, ease of access, and sustainable financial protection.