Says farmers will be unable to afford insurance premiums
Veteran rice farmer Beni Sankar has told Stabroek Business that he supports the creation of a risk-protection fund for farmers rather than the pursuit of risk insurance for the agricultural sector.
Sankar’s comment coincides with a recent announcement that government is to secure the services of a consultant to examine the feasibility of risk insurance for the sector. But Sankar says that risk insurance for farmers is likely to prove far too expensive and that instead a fund should be set up for such insurance purposes.
An evaluation of the risks associated with the agricultural sector in Guyana is currently being undertaken with the assistance of the World Bank. The aim of the exercise is to devise a system to facilitate insurance risk transfer.
World Bank Senior Agriculture Economist, Diego Arias, said in a recent statement that “the agriculture sector in Guyana is not only vulnerable to increasingly unpredictable and extreme weather events but also to a wide range of production constrains that compromise the competitive development of the sector. Ensuring a competitive Guyanese agriculture sector, and the design and development of an effective risk transfer solution, such as insurance, are crucial for the country’s development.”
But Sankar told Stabroek Business that he believes that premiums on insurance policies are too high for agriculture.
“We were looking for [insurance] coverage for a long while, but at the end of the day, we found that when you finish paying the premium you have no money left.”
Sankar told Stabroek Business that risks and losses had become all too familiar to local farmers. He pointed out that, in 1995, when the price for rice on the European market soared, he earned US$20.6M from sales of 60,000 tonnes of rice. The following year, having invested more heavily in the sector he sold the same tonnage for US$10.3M after rice prices collapsed. “You can understand, with us, borrowing heavily, what that did to us,” Sankar said.
Sankar said that the risks associated with farming had to do with much more than market volatility. He said that the sector was also vulnerable to changes in weather patterns, floods and other misfortunes. “Because of the risks to agriculture farmers need to be given a working interest rate from lending banks. What we need is something like a GAIBANK to give the farmers a preferential rate. Commercial banks are not good for that kind of business. You go to a bank and ask for the agriculture sector and it is non-existent. If it exists it is very small.”
Reflecting on the 2007 European Union-financed G$1.6Bn fund for rice farmers which was administered by the Guyana Bank for Trade and Industry (GBTI) Sankar said that those funds may have better served the rice industry if they were used to provide payments to farmers immediately following delivery of paddy to millers.
Sankar told Stabroek Business that he believes that a possible solution to the problem of a lack of financing for insurance in the agricultural sector is the setting up of associations to which member farmers contribute financially, with matching amounts from government. “This whole thing has got to be looked at in its entirety,” Sankar said.
