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DHAN Foundation

About the Project
Project Name: 
Evolving Climatic Adaptation through Crop Insurance
Type of Facility Project: 
Innovation Grant
País de operaciones: 
Asia and the Pacific
Project Thematic Focus: 
Product design
Agriculture and livestock
Type of Risk Carrier: 
mutual or community-based
Type of Distribution Channel: 
Mutuals, community-based organizations
Project Description: 


The project aims to use weather indexed crop insurance as a tool to adapt to climate change. Farmers organized as self-help federations under People Mutuals will act as risk carriers, with a risk transfer mechanism from Eureko Re, and will develop location-specific crop insurance products.

To stimulate demand and build capacity, farmers will be trained on climate change, drought and water management issues. Farmer federations will develop, through Mutual Insurance Committees (MICs), a mutual solution for specialized, localized crop insurance needs. Although the products are envisioned to cover various crops, soil and climatic conditions, the model is designed to be replicated.

Existing weather stations are 20-200 kilometres apart, creating unacceptably high basis risk. As part of the project, local rain gauges will be installed to create greater precision (covering as low as a 5 km radius). A study, supported by the Facility and technical assistance experts at the World Food Programme, will be conducted to optimize (and measure the cost-benefit of) the placement and number of rain gauges.

Consortium Members: 


The project targets small farmers organized by DHAN Foundation who do not have access to insurance mechanisms for adapting to climate change related issues. The Tankfed Agriculture Development Program and Rainfed Farming Development Program of DHAN Foundation have a reach of over 100,000 small farmers. These farmers, especially rainfed farmers, face various risks to their livelihood. Weather risks are the primary concern as more than 60 to 80 percent of crop yield depends on the adequate quantity and proper distribution of rainfall. In the past decade, farmers have faced many issues arising from climate change, including a decline in annual rainfall, late onset and early withdrawal of monsoon, and a change in dry spell patterns. The consequences of these changes can be dramatic and include frequent crop losses (and associated loss of income), migration and change of vocation. The traditional coping mechanisms such as savings or credit are not sufficient to manage these issues; they also are not available to all. The farmers, however, do not understand insurance well or lack a culture of risk management. Most farmers equate payment of premium to saving and expect something in return. Their landholding is fragmented and their income is low. They do not have access to existing commercial insurance companies’ crop insurance products and services which meet their needs.

The pilot will begin in five federations the first year, scaling up to 15 federations in Year 2 to serve a total of 22,000 small farmers.

Lessons from the Project
Learning Agenda: 
  • How to insure different crops and determine the probability of individual crop risks, determine loss associated with individual risks, and affordability?
  • What factors determine the efficiency and effectiveness of crop insurance programmes? Specifically, how to control adverse selection and moral hazard and maximize member enrolment and retention?
  • How to optimize the placement and number of automatic rain gauges, and ensure that the rainfall recorded in the rain gauges is accurate, reliable and representative of field conditions?
Emerging Lessons: 
  • It is critical to work closely with the community in order to understand the risks being faced by them. 
  • The product features need to be explained and understood in local terms.
  • Customer education has an important role to play.
  • Systematic awareness and education is required at all levels.
  • Aligning the product with the other products available in surrounding or nearby areas.
  • Customer education is not an ad-hoc activity – it needs to be continued after the risk period.
  • The rainfall data from the rain gauges needs to be monitored regularly and recorded.
  • Rain gauge installation can take time and hence should be started early in the project.
  • Presence of rain gauges is critical for the farmer to get convinced about the product.
  • Rain gauges helped in better product explanation and understanding.
  • Rain gauges helped in dispersing risk and prevented “bunched” claims payouts.
  • The sales team needs to be convinced and their doubts have to be clarified first.
  • Premium collection needs to be aligned to “availability and ability” to pay.

Date of last Learning Journey update: January 2012

About the Organization
Tipo de vínculo con el Fondo: 
Innovation grantee
Country of Head Office: 
Region : 
Asia and the Pacific
Type of institution : 
Non government organization
Participation in Microinsurance: 
Distribution channel
Organizational Overview: 

DHAN Foundation, an Indian-based professional development organisation founded in 1997, aims at enhancing rural development innovations and scaling up interventions to eradicate poverty in vast areas of the country. It engages in various activities, such as microfinance, water, rainfed agriculture development, ICT for Development, local governance, coastal conservation and livelihood development. Microinsurance is a cross cutting topic in the Foundation’s work.

People Mutuals, a community association, is the insurance arm of Dhan Foundation. It was set up in 2003 with the support of Oxfam Novib and Rabobank Foundation, to facilitate access to microinsurance among the members of self help groups and other peoples’ organizations supported by DHAN Foundation. Its mission is to help safeguard low-income people from risks and vulnerabilities through mutual solutions and collaboration with insurance providers.

More about the Organization