Bolivia’s First Crop Insurance Scheme Promises to Empower Farmers

Friday, August 19, 2011

Natural disasters can come with six-digit figures of damage and debt attached, even in Latin America’s poorest country. Bolivia’s rural areas, still dependent on rain cycles, are the most financially vulnerable to drought, frost, hail, floods and other weather adversities. Lose your crops, farmers say, and you’re left with nothing but your debts.

Luis Alvaro Toledo, who’s worked in the insurance business for more than 30 years, believes he has a solution. “To think of crop insurance in Bolivia used to be a utopia,” he says. “But we’re now going to give cheap and accessible insurance to very small farmers.”

Toledo leads one of the partners in Bolivia’s first crop insurance scheme, which will be rolled out as a pilot project in the southern region of Tarija, on the border with Argentina, before the onset of the rainy season at the end of the year. The scheme, undertaken with support from the International Labour Organisation (ILO) and one of the first of its kind in Latin America, gives triple protection to very small farmers: insurance against the loss of food crops, life insurance in case a close family members dies, and property insurance should tools be stolen or a leaking roof damage food supplies.

Bolivia has one of the world’s most far-reaching micro-credit industries. In a country of 10 million people, the biggest bank, BancoSol, is loaning $500m to more than 150,000 Bolivians. Yet Miguel Solana, a programme officer who runs the Bolivia project at the ILO, says: “Credit is not the only solution.” He believes farmers in Latin America have wrongly been given loans for far too long, when they would have derived greater benefit from an insurance policy instead.

“We have to think that farmers need to have access to different financial products, to help them cope with different needs in their daily activities. But people ask for credit for things that happened [like a bad harvest] that could have been covered by insurance,” says Solana.

He argues that if a farmer wants to grow by acquiring more land or better tools, for example, it makes sense to get a loan that can be repaid after a good harvest. But for credit to work well, he adds, harvests need to be protected by insurance. Otherwise, a farmer who loses an entire crop because of bad weather will have great difficulty repaying.

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