Press Release

On 9 March, 2022, the Indonesian government inaugurated the pilot project for Area Yield Index Insurance (AYII) at Karawang District, West Java, in an online and face-to-face hybrid approach. The inauguration ceremony, once postponed due to COVID-19 pandemic, was attended by around 70 people, and shared the results and future plans of the pilot project.

Representatives from Agriculture Department of Karawang District

JICA has been introducing and working on agricultural insurance since 2010 as part of "Project of Capacity Development for the Implementation of Climate Change Strategies". Subsequently, in 2017, JICA launched a new project which focused on agricultural insurance, namely "Project of Capacity Development for the Implementation of Agricultural Insurance". After that, in addition to support for the existing AUTP (Indemnity based agricultural insurance for paddy), the Project introduced AYII (Area Yield Index Insurance) in 2020. The Project has been working with the Karawang District in West Java as a pilot region, engaging in various efforts including collecting and analyzing past yield data, conducting joint work on the CCE (Crop Cutting Experiment) survey, developing the insurance product, training extension workers, and developing tools for insurance sales and socialization activities.

Because of Covid-19 pandemic has severely curtailed promotional and sales opportunities, the goal coverage area for this pilot implementation in Karawang District was determined at 1,000 hectares, where 433.45 (about 300 farmers) hectares of land were subscribed.

Then at the end of the cropping season, 115 hectares in areas where the yield did not reach the set benchmark and a total of IDR 357 million (approx. 280,000 yen) was paid to the groups of farmers (maximum IDR 6 million per hectare ≈ 48,000 yen) by JASINDO, a state-owned insurance company.

Representatives of the farmers group received insurance payout

The pilot target area will be further expanded to Kendal District, Central Java in the next crop season. Dr. Arifin Rudiyanto, Acting Deputy Minister of BAPPENAS (National Development Planning Agency), said, "AYII has the advantage of preventing moral hazard and does not require each loss assessment on a field-by-field basis through the use of index. We believe that this pilot project can serve as a good sample for other regions, and we have high expectations for the future. Agricultural insurance, which includes AYII, is a one of key components of the National Medium Term Development Plan (RPJMN) 2020-2024, and furthermore contributes to SDG 2: "Zero Hunger" and SDG 13: "Climate Action." He added that BAPPENAS is committed to further development in accordance with Law No. 19 of 2013 on Farmer Protection and Empowerment. "Since AYII payouts are based on an index, we need to implement more pilot sites from irrigated to non-irrigated areas, and Java to non-Java regions to see how it works," said Dr. Ali Jamil, Director General of the Ministry of Agriculture. "In addition, I would like to suggest to BAPPENAS that agricultural insurance be made a nationwide program, rather than a pilot project", He stated.

NOTE: The Indonesian government subsidizes 80% of the premiums for public agricultural insurance. This pilot project was done under the same conditions, the target farmers are those who own less than 2 hectares of farmland, which is the same as the AUTP. The insurance premium in Karawang was set at a flat rate of IDR159,000 per hectare, of which 80% was borne by the government, and the financial burden the farmers had to bear was IDR 31,800/hectare.

For more details, please contact:
Inoue.Erika3@jica.go.jp ; Ninditaparamastuti.IN@jica.go.jp