Global Policy Forum

Natural disasters can come with six-digit figures of damage and debt attached, even in Latin America's poorest country. Bolivia's rural areas, still dependent on rain cycles, are the most financially vulnerable to drought, frost, hail, floods and other weather adversities. Lose your crops, farmers say, and you're left with nothing but your debts.

Luis Alvaro Toledo, who's worked in the insurance business for more than 30 years, believes he has a solution. "To think of crop insurance in Bolivia used to be a utopia," he says. "But we're now going to give cheap and accessible insurance to very small farmers."

Toledo leads one of the partners in Bolivia's first crop insurance scheme, which will be rolled out as a pilot project in the southern region of Tarija, on the border with Argentina, before the onset of the rainy season at the end of the year. The scheme, undertaken with support from the International Labour Organisation (ILO) and one of the first of its kind in Latin America, gives triple protection to very small farmers: insurance against the loss of food crops, life insurance in case a close family members dies, and property insurance should tools be stolen or a leaking roof damage food supplies.

Bolivia has one of the world's most far-reaching micro-credit industries. In a country of 10 million people, the biggest bank, BancoSol, is loaning $500m to more than 150,000 Bolivians. Yet Miguel Solana, a programme officer who runs the Bolivia project at the ILO, says: "Credit is not the only solution." He believes farmers in Latin America have wrongly been given loans for far too long, when they would have derived greater benefit from an insurance policy instead.

"We have to think that farmers need to have access to different financial products, to help them cope with different needs in their daily activities. But people ask for credit for things that happened [like a bad harvest] that could have been covered by insurance," says Solana.

He argues that if a farmer wants to grow by acquiring more land or better tools, for example, it makes sense to get a loan that can be repaid after a good harvest. But for credit to work well, he adds, harvests need to be protected by insurance. Otherwise, a farmer who loses an entire crop because of bad weather will have great difficulty repaying.

Farmers in the rural town of Tomatas, near the city of Tarija, are familiar with financial institutions like BancoSol, Banco FIE, Banco Los Andes Procredit, and Pro Mujer, all with branches in their rural community. At the age of 63, Abel Sigler still farms the land with his six children. "A lot of us ask for a loan to plant potatoes or peas," he says. "Come hail or a frost, we lose everything. But we still have to give back this loan no matter what, and have to sell a cow to pay it back."

José Santos has also been farming for decades. "We farm with the bones of our own hands, and hope we'll have good luck with the weather." But last year Feliciano Gallardo wasn't so lucky. "I planted corn and wheat in mid-November, but it still wasn't raining," he says. "Then a frost came and froze everything. The wheat hadn't grown, and the corn hadn't ripened – just very small grains. When this happens, we have to seek other work so that we can begin farming again the following year."

Work migrations are not only common, but sometimes permanent. "My three daughters live in Argentina," says Ruperto Segobia, another farmer. "People want to leave. There isn't a person in town who hasn't been to Argentina or doesn't have family there."

Helped by international donors, Bolivia does deliver emergency aid to communities after major natural disasters. But Ernesto Farfán of Profin, one of the partners in the project, believes farmers can't rely on this assistance, as it's patchy and largely ineffective. "It not only takes months for aid to reach these communities," says Farfán. "But it also comes with food, mattresses and blankets – things that aren't relevant to farmers to restart their productive cycle." Emergency aid is needed in such disasters, he agrees, but only with insurance can farmers speedily recover their financial investment, buy new seeds and bounce back.

The ILO, with funding from the Bill and Melinda Gates Foundation, wants to empower farmers like the ones in Tomatas to make the right financial investment, so they don't fall into deeper poverty or find themselves forced to move to the city in search of work.

Solana wants to roll out the project nationwide next year and hopes to use the lessons learned from Bolivia in other countries in the region. "When I'm insured as a farmer," he says, "I feel like I never lose out. And that's why I invest in new machinery and better seeds, and how I get out of poverty." As in India, stories circulate in Bolivia of people who kill themselves when unable to repay a loan. The ILO believes offering small insurance policies to poor farmers is a way to avoid anyone resorting to such desperate measures.