Support to Public Finance and Finance Sector Reform in Henan Province

Client: Asian Development Bank

Duration: 2018-2020

Location: Henan Province, PRC

Contract Value: USD 487,863

Catalogue: Agriculture

Project Description

In 2007, Henan Province was included in the agricultural insurance subsidy pilot program by the Central Government. In the same year, Henan Province issued the Pilot Program of Policy-based Agricultural Insurance in Henan Province. Since then, agricultural insurance in Henan has been rapidly developed. Although the agricultural insurance sector has been rapidly developed in PRC and Henan Province in the last decade, there are still many challenges and problems. The available types of insurances are limited and do not meet the demands of modern agriculture. Also, there exist low awareness of agricultural insurance and its benefit among farmers and herders, high transaction cost associated with agriculture insurance and heavy premium subsidy burden on the public finance. This technical assistance (TA) aims to assist the Henan Provincial Finance Department to review the agricultural insurance sector in Henan province to understand agriculture risk, propose risk management strategies which includes insurance and how best subsidies can be used to promote sector resilience and alleviate financial burden on the province.

Services Provided by NAREE

Assessment of agricultural supply chain risk and risk management – NAREE conducted the assessment to understand the risk exposure of agricultural supply chain participants and to identify improved risk management strategies for selected commodity systems. The assessment included risks identification, risk exposure, the severity of potential loses, constraints and options for risk management by either supply chain participants or by third parties.

Diagnostic assessment of agriculture sector insurance - NAREE undertook a number of assessments on institutional arrangements, agriculture insurance policies and operation, cost benefits analysis of insurance and insurance subsidy. Domestic and international best practices in safeguarding against agriculture risks and high-level technology adopted in agriculture insurance were also reviewed. Based on the diagnosis, policy recommendations were raised by NAREE to create an enabling environment for improved institutional arrangements, mechanism(s) for addressing and safeguarding against agriculture risk that includes transformation of the direct agriculture subsidy to a more innovative financial subsidy mechanism, use of high-level technology and improving access to credit.

Development of agriculture insurance solutions - New solutions, agriculture insurance, access to credit, technology and improved production practices and insurance products etc., were proposed by NAREE to fit the need for safeguarding agriculture risk and demand from within the supply chain, awareness enhancement about and capacity to implement open investment and partnerships in agriculture.