Phnom Penh, Khmer Times – At least 60 drought-stricken farmers in two districts of Battambang province have received crop insurance from FTE Insurance.
Mr. Som Sot, 48, from Snaun village in Banan district, told the Khmer Times that he bought insurance from FTE in July after a company representative came to the village to promote the product. He said that within two months, almost all the seedlings in his rice fields had been destroyed by the drought.
Mr. Sot explained, “I bought this insurance in July from the company because it was affordable and it could protect my rice crops. When my rice fields did not have enough water, the insurance company compensated me.”
FTE Insurance launched the pilot project in July, and it is the first time that Cambodia has this type of insurance. Industry observers expect this type of insurance to grow, saying it will help mitigate the impact of climate change, which is expected to hit Cambodian farmers because they lack adequate irrigation. They are therefore almost entirely dependent on erratic seasons.
First steps
Yuk Chamroeunrith, CEO of Forte Insurance, told the Khmer Times that this is the first time Forte has offered insurance on rice crops. The company provided insurance on crops such as rubber, corn and cassava earlier this year, before expanding to rice in July.
“We have just launched this pilot project in two districts of Battambang province, Pawil and Banan, to gauge the demand for this type of service,” Chamroeunrith explained. He said the company plans to provide insurance to 1,000 farming families, but because the insurance is new, only a few farmers are interested. “They are hesitant to buy the service because they are not familiar with it,” Chamroeun Rith said.
However, 60 farmers have already purchased the insurance. Chamroeun Rith said they have purchased insurance on one hectare of rice fields for $17. He added that the first payment for damage caused by the drought was made on September 19.
Chamroeun Rith said the payment is the first step in the insurance period for the growing season, which ends in mid-December. He added that if farmers’ rice crops continue to be damaged by the drought, insured farmers will receive more money.
Receiving compensation
Soth said he has four hectares of rice fields, but only one of them is insured, as stipulated in the contract with FTE. “The company doesn’t allow us to buy more than one hectare because they just want us to try the service,” the farmer explained.
Te Tieng, a 64-year-old farmer in Phnom Sampov village, Ban An district, said he received compensation for his crop insurance last month.
An assessor from Forte went to his field and determined that the one-hectare of insured rice field had been damaged by drought.
“We received about $17 from them,” he told The Khmer Times by phone last week. Teeng said the compensation was the same as the amount he paid for crop insurance, and he blamed the lack of rain for the almost complete destruction of his seedlings.
Next Steps
Economist Srey Chanthy welcomed the report on rice insurance, saying it could contribute to agro-industrial development. “I am very happy to hear that it is now being implemented in Cambodia. It is a good thing,” he said.
“It has already been successfully implemented in other countries, both developing and developed. It will help farmers by transferring risk to insurance companies. But this is just one risk (climate change),” he said. Farmers also face other risks, such as unstable market prices, lack of technology and transportation, he said.
Chanthy said that for climate change, government intervention is necessary, and in industrialized countries, farmers receive a lot of government funding. “Government intervention should be done within the means and resources available,” he said.
According to the Ministry of Agriculture, about 234,695 hectares of rice fields in 16 provinces have been damaged by drought as of the first week of this month.
Mr. Chamroeun Rith said that Forte will continue to compensate farmers throughout the season if their insured crops are damaged. “I think this service is a great relief when they are adversely affected by climate change during the growing season,” he added.
He also noted that the market for this type of service is vast because 65 percent of Cambodians depend on agriculture for their livelihoods.
Mr. Chamroeun Rith said, “As a private company, we are not only concerned with profit, but we also have to think about social responsibility, so we have to find ways to help farmers. We have to help farmers gain stability in their daily lives, which will encourage them to invest in their rice fields.”
He added that the company plans to meet with government officials to expand the pilot project nationwide.
Slow Growth and Climate Change
In 2013-14, agro-industry growth was less than 2 percent, according to a World Bank report.
The report said that growth of at least 5 percent over the next 15 years would be enough to boost farm household incomes.
With 5 percent growth, farm household incomes could triple from $1,200 per person per year to $3,760 by 2030. An annual growth of 3 percent would see incomes rise to just $2,500 by 2030.
The World Bank has said it could increase its lending by 7 percent this year to help address climate change. The bank said it has already spent $10.3 billion on climate-related projects, and that this will increase to $16 billion.
The Asian Development Bank also announced last month that it would increase its lending to help address climate change. The bank says it will increase its annual climate-related budget from $3 billion a year to $6 billion a year by 2020, and that financing to help mitigate climate change will account for 30 percent of total financing.
