The International Finance Corporation (IFC), a World Bank private sector financing arm, and specialist reinsurer Reasuransi Maipark Indonesia will work together to develop agricultural insurance products to cover local farmers from weather risks.
The insurance schemes will be index-based, paying out whenever a weather condition, such as rainfall, temperature, wind speed, and crop yield, exceeds a predetermined level. This system can provide cheaper and less-complicated insurance benefits to farmers, who are usually at the mercy of natural disasters such as droughts, floods, and hurricanes.
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“The national program to achieve food security and improve people’s productivity will need to be supported by all parties, including by us,” Maipark president and director Yasril Rasyid told the Jakarta Globe on Thursday. “The insurance industry can support this program by providing protection against risks faced by agricultural stakeholders.”
IFC will provide Maipark with support to work with local companies in developing and selling insurance products bundled with agricultural loans to farmers, agri-businesses, and banks.
“The region’s changing climate has made agricultural insurance essential to protect local businesses and strengthen industries so they become resilient to new weather patterns,” IFC country manager for Indonesia and Malaysia Azam Khan added.
This program is part of the Indonesian government’s push to become self-sufficient in important agricultural products such as rice, corn, and beef by 2019. It aims to develop new farming infrastructure and providing financial assistance to farmers.
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