Fund for agricultural insurance to appear in Azerbaijan

By Azernews

By Sara Israfilbayova

A single institute, which will supervise the field of agricultural insurance, will be established in Azerbaijan.

This institution will be created on the basis of insurance pool and will act as a fund, which will include the insurance companies operating in the country. The Fund, along with the supervision of this sphere, will also develop new insurance products, Aliya Azimova, the head of the International Finance Corporation’s (IFC) local representation told Trend.

Currently, 22 insurance companies are implementing their activities in the country.

She went on to say that data is being collected for risk assessment in the field of agricultural insurance in order to prepare the first insurance products in the next year.

Azimova noted the Azerbaijani government is keen on to use the Turkish model of agricultural insurance, which is called TARSIM. As part of the project, IFC is looking for the most appropriate options for implementing this model in Azerbaijan.

TARSIM Agricultural insurance system is now a reference model in the world along with other schemes.  TARSIM, the integrated agricultural risk management, is aimed to promote, spread of agricultural insurance and to conduct the necessary applications fast and accurate, in order to protect the farmers against the natural disasters and other risks.

 TARSIM is seen in the agricultural sector as moving from crisis management to the risk management.

Currently, IFC, together with the Ministry of Agriculture and the Financial Market Supervisory Body (FMSB), is working on a project to introduce an agricultural insurance system in the Azerbaijan.

The Agricultural Insurance Fund will be created within the framework of the implementation of the Strategic Road Map for the production and processing of agricultural products.

Azerbaijan, which is keen to diversify its economy on the basis of further development of the non-oil sector, defines agriculture as one the main directions.

The fertile lands, abundance of water and climatic diversity create favorable foundation for ever-strengthening agro-sector. Presence of nine climatic zones allows the country to produce a variety of agricultural products and brings about new opportunities for coming up with different types of goods.

Azerbaijan has 4.8 million hectares of agricultural land, which comprises over 50 percent of its total territory, of which39.6 percent is arable. Meanwhile, the food-processing sector constitutes an important component of the national economy and accounts for over 38 percent of total manufacturing industry.

In the country, agricultural producers are exempted from paying all taxes (except tax for land), in accordance with the Law “On granting tax benefits to producers of agricultural products,” adopted on November, 2001.

Moreover, since 2007, the state has been offering preferences for agricultural producers and entrepreneurs involved in agricultural sector, in order to provide comprehensive support to producers, which helps to create competitive environment.

Employment in the agriculture sector hit 1.7 million as of early 2017, which comprises 37 percent of the economically active population of Azerbaijan. The agrarian sector grew by 2.2 percent and agricultural exports by more than 40 percent over the first half of 2017.

The revival of agriculture sector plays an important role in the development of rural regions, where 47 percent of Azerbaijan's population lives.

IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector in developing countries. 

Azerbaijan became a member of IFC in 1995. As of December 31, 2016, IFC has invested $473 million, of which $73 million was mobilized from other lenders, financing 56 long-term projects across a range of sectors, including financial services, infrastructure, and manufacturing sectors.

In addition, IFC has supported around $80 million in trade through its trade finance program and provided $250 million for Baku-Tbilisi-Ceyhan pipeline (BTC). IFC has also implemented a range of advisory projects aimed at encouraging private sector growth.