1. Pakistan Poverty Alleviation Fund April 28-29, 2015 Innovations in Managing Catastrophic Risk in Agriculture Finance - Strategy & Actions

2.  An independent legal entity under the section 42 of the Companies Ordinance 1984 with a Robust governance structure  Premier national apex, with credibility, track record and strategic positioning, operational since 2000  National presence, outreach, scale, growth platforms, networks and drivers of community-driven development – 121 partner organizations & 500,000 community organizations and groups  Ability to crowd-in investments, convene alliances, partnerships and relationships (national and international)  Sector developer – creating the eco-system for microfinance, livelihoods, renewable energy…  Agility to respond effectively and immediately to natural disasters PPAF – The Apex

3. Cumulative September, 2014(figures rounded off) Source: Compliance and Quality Assurance – PPAF Fact File Large portion of investments in Water, Infrastructure and Livelihood targeted at promoting Agriculture. 80% Loans are in rural areas with 60% Portfolio in agriculture (small farmers)

4. Employs 45% of the country’s labor force Accounts for 70% of total exports directly and indirectly 3rd largest milk producing country in the world 66% of rural population dependent on agriculture 24% Contribution to GDP Agri-sector in economy of Pakistan Crops Livestock Forestry Fishing Agriculture growth percentages (Base=2005-06) 2011-12 2012-13 2013-14 3.22.3 1.2 4.03.5 2.9 1.81.0 1.5 3.80.71.0 Pakistan Economic Survey 2013-14 Average Yields (Kg / hectare ) (Wheat, Cotton, Rice, Maze, Sugarcane) National Average: 58,615 (kg/ha) Progressive farmer: 126,125 (kg/ha)

5. Risks in Agriculture Finance Key challenges for rural and agricultural financial service provision a.Systemic Risk – Low returns & unpredictable capital flows b.Market Risk c.Credit Risk – collateral, especially mortgage 1. Vulnerability Constraints 2. Operational Constraints 3. Capacity Constraints a.Investment Returns and Capital Flows b.Low Investment and Assets c.Geographical Dispersion a.Infrastructural capacity constraint b.Technical & Training constraint c.Social Exclusion d.Institutions Limited client awareness & absence of customized, client centric products

6. PPAF-Addressing Risk through Innovation Initiatives Value Chains Tunnel Farming Introducing off-farm businesses Renewable Energy Asset Backed Lending Technology & Branchless Banking Micro Insurance

7. Conditions for success of Insurance products For Insurance companies Insurance premium > expected loss + risk margin + administrative Cost For the Farmers Expected utility without formal insurance < expected utility with formal insurance

8. Baseline Survey Partnership with Key Stakeholders Product Design Community Perception Surveys Awareness Campaigns Launching of the Insurance Products PPAF provided platform to all stakeholders and shepherd the process to develop Sustainable, Scalable, Affordable and Flexible products PPAF’s MI Initiatives Index Based Crop Insurance Crop Yield Insurance Micro-insurance for milking animals Live Weight Livestock Insurance PPAF through strategic partnership with SECP, NARC, MFIs, insurance companies, Met department & renowned experts designed and launched various innovative agricultural insurance products

9. Innovation in MI First of its kind in Pakistan 30 years data on crop yield and weather used to develop index 2,400 acres Premium ranges from PKR 530 to 980 per acre 1. Index Based Crop Insurance 2. Crop Yield Insurance First of its kind in Pakistan 5 Years data of Yield collected on wheat and cotton Model based on historical crop yields covering 32,000 acres and improving the lives of poor farmers in Bahawalpur Premium: 3% of reference yield Mitigating information asymmetry and moral hazard issues through automated claim settlement and involvement of Communities

10. First of it’s kind in the world Growth rate of different species under varied feeding regimes based management determined through Government’s livestock research institutes historical data Animal prices calculated on the date of loss, ensuring adequate compensation to the policyholder 12,500 animals insured Premium: 6% 3. Live Weight Livestock Insurance 4. Micro- insurance for Milking Animals Specialized product for large milking animals Claim settlement is based on a model where the value of the animals is based on its productivity 23,000 animals insured under conventional micro-insurance and micro-insurance for milking animals Upscale including 41,000 more animals Premium small animals: 5%, Large animals: 4% Innovation in MI

11. Government & Donors - Create an agriculture insurance fund to: - Support for R&D and piloting in various districts while investing in Infrastructure - Promote & fund ways to better cover catastrophic risks - Subsidy for poor communities till they graduate - Protection of clients rights and regulatory supervision along with client awareness and Literacy Insurance and MF sector - Addressing moral hazard and adverse selection through informal mechanisms - Up-scale successful pilots - R&D and risk taking for new niche to expand the business - Active participation in existing platforms. - Reduce costs by using aggregators & technology Way Forward

12. Thank You