KATHMANDU, Dec 31, 2012
The agriculture and livestock insurance regulation, that the
Insurance Board is planning to introduce, will support in encouraging
financial institutions finance more agro projects.
Despite Nepal being an agriculture based country, the portfolios of financial institutions contain a negligible amount of agro loans. The agriculture sector is considered risky for its dependence on weather conditions and similar uncontrollable factors.
Thus, the introduction
of agro-insurance service is expected to stimulate lending to the sector as banks will also be assured that loans will not go bad.
“The absence of proper insurance of crops, livestock and poultry has deterred financial institutions from financing agro projects,” said spokesperson of Nepal Rastra Bank Bhaskar Mani Gyanwali.
In the first four months of the current fiscal year, financial institutions lent Rs 32.4 billion under agriculture heading, which is a fraction of the total lending made by financial institutions during the period that stood at around Rs 844 billion.
“The existence of such insurance schemes that mitigate risks will encourage banks to finance agro projects,” he added.
The regulator of the insurance sector in the country — Insurance Board — is ready to introduce its Agriculture and Livestock Insurance Directive soon that will provide functional clarity for non-life insurance companies to insure crops, livestock and poultry business.
“To promote commercial agriculture, agro-insurance is a prerequisite,” said chairman of Insurance Board Prof Dr Fatta Bahadur KC.
The insurance regulator has completed a draft of the directive that will make it obligatory for non-life insurance companies to issue insurance policies on crops, poultry and livestock.
According to the directive, insurance companies can insure commercial crops, livestock and poultry. The regulator has also determined the insurance premium ranging from five per cent to seven per cent of the sum assured in case of indemnity depending on the nature of the policy.
“Agro-insurance facility is a national necessity for a country like ours which is dependent on agriculture sector, and we are hopeful that the new facility to be launched by Insurance Board will contribute to commercial farming,” said chairman Dr KC.
At present, there is no
Insurance Board-licensed insurance company that provides crop and livestock insurance.
Some of the microfinance institutions, agriculture cooperatives and financial Non Government Organisations (NGOs) have been providing insurance of crop and livestock as part of their credit plus programme to their beneficiaries.
However, the coverage
of these institutions is limited and they only provide insurance for amounts less than Rs 100,000.
In order to provide more financing to agriculture in order to further commercialise the sector, Nepal Rastra Bank has asked the commercial banks in the country to increase their lending to the agriculture and energy sectors to 10 per cent by mid-July 2014.
Source: THT
Despite Nepal being an agriculture based country, the portfolios of financial institutions contain a negligible amount of agro loans. The agriculture sector is considered risky for its dependence on weather conditions and similar uncontrollable factors.
Thus, the introduction
of agro-insurance service is expected to stimulate lending to the sector as banks will also be assured that loans will not go bad.
“The absence of proper insurance of crops, livestock and poultry has deterred financial institutions from financing agro projects,” said spokesperson of Nepal Rastra Bank Bhaskar Mani Gyanwali.
In the first four months of the current fiscal year, financial institutions lent Rs 32.4 billion under agriculture heading, which is a fraction of the total lending made by financial institutions during the period that stood at around Rs 844 billion.
“The existence of such insurance schemes that mitigate risks will encourage banks to finance agro projects,” he added.
The regulator of the insurance sector in the country — Insurance Board — is ready to introduce its Agriculture and Livestock Insurance Directive soon that will provide functional clarity for non-life insurance companies to insure crops, livestock and poultry business.
“To promote commercial agriculture, agro-insurance is a prerequisite,” said chairman of Insurance Board Prof Dr Fatta Bahadur KC.
The insurance regulator has completed a draft of the directive that will make it obligatory for non-life insurance companies to issue insurance policies on crops, poultry and livestock.
According to the directive, insurance companies can insure commercial crops, livestock and poultry. The regulator has also determined the insurance premium ranging from five per cent to seven per cent of the sum assured in case of indemnity depending on the nature of the policy.
“Agro-insurance facility is a national necessity for a country like ours which is dependent on agriculture sector, and we are hopeful that the new facility to be launched by Insurance Board will contribute to commercial farming,” said chairman Dr KC.
At present, there is no
Insurance Board-licensed insurance company that provides crop and livestock insurance.
Some of the microfinance institutions, agriculture cooperatives and financial Non Government Organisations (NGOs) have been providing insurance of crop and livestock as part of their credit plus programme to their beneficiaries.
However, the coverage
of these institutions is limited and they only provide insurance for amounts less than Rs 100,000.
In order to provide more financing to agriculture in order to further commercialise the sector, Nepal Rastra Bank has asked the commercial banks in the country to increase their lending to the agriculture and energy sectors to 10 per cent by mid-July 2014.
Source: THT
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