The United Nations Food and Agriculture Organization (FAO) and the Myanmar Rice Federation (MRF) are working together to launch a warehouse insurance system pilot project at the beginning of the harvest season in November.
The aim of the insurance system is to provide a safety net for rice farmers affected by unstable prices that usually tumble during harvest season.
“The major challenge facing farmers is that they need money after harvesting to settle debts to the agricultural bank or other lenders. So they have no choice but to sell their crops amid low prices,” said Andrew W Shepherd, an agribusiness and marketing consultant with the UNFAO.
The warehouse insurance program will help provide solutions for farmers, he said, adding that the farmers can get receipts by storing rice at the warehouses, which they can then use as collateral to get loans from banks.
“They can also choose to sell the crops when prices rebound. The project has the potential to increase the income of farmers by 10-15 percent,” he said.
The first phase of the project will be tested in Danu Phyu township in Ayeyarwaddy region, the town of Pyi in Bago region, Hlegu township in Yangon, the town of Sittwe in Rakhine state and Naypyitaw territory.
An important project requirement is for banks and warehouse operators to have access to updated crop prices and market information. The government should also work to enact strong laws and regulations, Shepherd said.
“The project faces challenges because it needs the coordination between banks and warehouses. The banking sector’s staff needs to have sufficient knowledge in farming. If the banks and warehouses do not have relevant information, they would be able to participate.”
The technological and banking aspects of the system were prepared last year after the MRF submitted a proposal regarding the system to FAO. The system will be monitored in order to identify strengths and weaknesses.
“The FAO is providing technical support for the project. The MRF president, U Chit Khaing, is providing the warehouses. For the first year, the project will be on a small-scale basis.
“We are also negotiating with the central bank regarding this project,” said U Ye Min Aung, secretary general of MRF.
The warehouses are planned to accept three varieties of rice per region, and overall the project includes 10 varieties that are compatible with the local market. The project will be implemented in places with the highest concentration of warehouses in select townships.