Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Pakistan Poverty Alleviation Fund Innovations in Managing Catastrophic Risk in Agriculture Finance - Strategy & Actions April 28-29, 2015 PPAF – The Apex An independent legal entity under the section 42 of the Companies Ordinance 1984 with a Robust governance structure Premier national apex, with credibility, track record and strategic positioning, operational since 2000 National presence, outreach, scale, growth platforms, networks and drivers of community-driven development – 121 partner organizations & 500,000 community organizations and groups Ability to crowd-in investments, convene alliances, partnerships and relationships (national and international) Sector developer – creating the eco-system for microfinance, livelihoods, renewable energy… Agility to respond effectively and immediately to natural disasters Fact File Cumulative September, 2014(figures rounded off) Source: Compliance and Quality Assurance – PPAF Large portion of investments in Water, Infrastructure and Livelihood targeted at promoting Agriculture. 80% Loans are in rural areas with 60% Portfolio in agriculture (small farmers) Agri-sector in economy of Pakistan Employs 45% of the country’s labor force Accounts for 70% of total exports directly and indirectly 3rd largest milk producing country in the world 66% of rural population dependent on agriculture 24% Contribution to GDP Pakistan Economic Survey 2013-14 Agriculture growth percentages (Base=2005-06) 2011-12 2012-13 2013-14 Crops 3.2 2.3 1.2 Livestock 4.0 3.5 2.9 Forestry 1.8 1.0 1.5 Fishing 3.8 0.7 1.0 Average Yields (Kg / hectare ) (Wheat, Cotton, Rice, Maze, Sugarcane) • National Average: 58,615 (kg/ha) • Progressive farmer: 126,125 (kg/ha) Risks in Agriculture Finance Key challenges for rural and agricultural financial service provision a. 1. 2. 3. Vulnerability Constraints Operational Constraints Capacity Constraints Systemic Risk – Low returns & unpredictable capital flows b. Market Risk c. Credit Risk – collateral, especially mortgage a. b. c. Investment Returns and Capital Flows Low Investment and Assets Geographical Dispersion a. b. c. d. Infrastructural capacity constraint Technical & Training constraint Social Exclusion Institutions Limited client awareness & absence of customized, client centric products PPAF-Addressing Risk through Innovation Initiatives • • • • • • • Value Chains Tunnel Farming Introducing off-farm businesses Renewable Energy Asset Backed Lending Technology & Branchless Banking Micro Insurance Conditions for success of Insurance products For Insurance companies Insurance premium > expected loss + risk margin + administrative Cost For the Farmers Expected utility without formal insurance < expected utility with formal insurance PPAF’s MI Initiatives PPAF provided platform to all stakeholders and shepherd the process to develop Sustainable, Scalable, Affordable and Flexible products Baseline Survey Partnership with Key Stakeholders Product Design PPAF through strategic partnership with SECP, NARC, MFIs, insurance companies, Met department & renowned experts designed and launched various innovative agricultural insurance products Community Perception Surveys Awareness Campaigns Launching of the Insurance Products • Live Weight Livestock Insurance • Micro-insurance for milking animals • • Index Based Crop Insurance Crop Yield Insurance Innovation in MI 1. 2. Index Based Crop Insurance • • • • First of its kind in Pakistan 30 years data on crop yield and weather used to develop index 2,400 acres Premium ranges from PKR 530 to 980 per acre Crop Yield Insurance • • • • • First of its kind in Pakistan 5 Years data of Yield collected on wheat and cotton Model based on historical crop yields covering 32,000 acres and improving the lives of poor farmers in Bahawalpur Premium: 3% of reference yield Mitigating information asymmetry and moral hazard issues through automated claim settlement and involvement of Communities Innovation in MI 3. 4. Live Weight Livestock Insurance • • • • • First of it’s kind in the world Growth rate of different species under varied feeding regimes based management determined through Government’s livestock research institutes historical data Animal prices calculated on the date of loss, ensuring adequate compensation to the policyholder 12,500 animals insured Premium: 6% Microinsurance for Milking Animals • • • • • Specialized product for large milking animals Claim settlement is based on a model where the value of the animals is based on its productivity 23,000 animals insured under conventional micro-insurance and micro-insurance for milking animals Upscale including 41,000 more animals Premium small animals: 5%, Large animals: 4% Way Forward Government & Donors - Create an agriculture insurance fund to: Insurance and MF sector - Support for R&D and piloting in various districts while investing in Infrastructure - Addressing moral hazard and adverse selection through informal mechanisms - Promote & fund ways to better cover catastrophic risks - Up-scale successful pilots - Subsidy for poor communities till they graduate - Protection of clients rights and regulatory supervision along with client awareness and Literacy - R&D and risk taking for new niche to expand the business - Active participation in existing platforms. - Reduce costs by using aggregators & technology Thank You