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Bangladesh encourages investment in public-private partnership (PPP) projects

20 June 2017

Bangladesh is a densely populated and poor country with an economy that depends largely on foreign aid and remittances from Bangladeshis working abroad, particularly in the Middle East and south-east Asia. According to the most recent official figures released in 2015, the non-life gross premiums were BDT 26.08bn (USD 334.62mn) which represented an increase of 6.72% over the previous year.  In the same year, Axco Global Statistics ranked Bangladesh as the 88th largest non-life market worldwide, one ahead of Iceland and one behind Bahamas. Growth in non-life premium in recent years has barely outstripped the effects of inflation.


Central policy priorities for the government have long included the implementation of a strategy for poverty reduction and has indeed made progress in this area, with poverty estimated to have dropped by 8.5% in the five years to 2012 and was said to affect 24% of the population in 2015.   With a growing middle-class, there is the possibility for greater penetration, but with most of the population living on minimal incomes, or outside the cash economy, the best chance for development lies with microinsurance products. 

Bangladesh has been instrumental in the spread of private sector micro lending since the 1980 and more recent insurance focused efforts have concentrated on public-private partnerships (PPP), most notably a pilot project instigated by the Asian Development Bank (ADB) with a grant from the government of Japan(USD 2mn) and additional funding from the Bangladesh government.  The project is managed by microfinance institutions, non-governmental organisations and farmers' co-operatives. The new programme, which includes livestock microinsurance, is being implemented under the auspices of the Palli Karma-Sahayak Foundation (PKSF), the government-backed organisation which provides funds to microfinance lenders.

A flood insurance pilot programme for people living in poverty was introduced in 2013 under the auspices of Oxfam, with a local community-based NGO as the policyholder. The programme, which initially covered 10 villages in the river basin areas in Sirajganj, is being funded by the Swiss Agency for Development and Cooperation and reinsured by Swiss Re, working with Pragati Insurance as the local direct insurer. The insurance provided is based on a flood index dependent on water levels and pays out BDT 8,000 (USD 102) per affected household in the event of a catastrophic flood.

In an attempt to encourage more interest in investment in public-private partnership (PPP) projects the government decided, in March 2016, that future PPPs would be allowed to place up to 50% of their insurance cover in overseas markets, rather than the 100% placement with SBC and other local insurers. As this contravenes the terms of the insurance legislation, SBC has protested against this decision and the proposal was being discussed at the time this report was in preparation in December 2016.

The first weather index based agricultural insurance scheme in Bangladesh was announced in December 2015. A joint-venture between Green Delta Insurance and the International Finance Corporation (IFC), the pilot project covers cassava crops in three districts. Under this project, the farmers of cassava crops are insured for damage caused by cold weather and excessive rainfall.

In December 2015, the government announced that it would be making proposals to ease the conditions required for foreign insurance companies wishing to invest in the local market. These are likely to include a reduction in the minimum shareholding which must be taken by a Bangladeshi investor. At the time this report was in preparation there had been no apparent progress in this regard.


For further information please refer to the non-life (P&C) insurance market report of Bangladesh or contact your Axco Representative.