Challenges of agricultural insurance development in Albania - Economicus

By: Grisejda MYSLIMI, PhD(c) & Emirgena NIKOLLI, PhD(c) & Joana SHIMA, Msc.

Abstract

Agricultural production is exposed to natural risks that cannot be prevented and lead not only to production losses but also to a decrease in farmers’ income. As a result of these risks, farmers often do not have the opportunity to pay their loans. Against risky borrowers, credit institutions refuse to give loans. Under these conditions, the government must intervene in risk management, trying to reduce these negative effects. The provision of agricultural products as one of the most important instruments for the financial support of this sector will be the focus of this paper. Agricultural insurance provides compensation for economic losses resulting from unfavorable natural phenomena, contributing to the reduction of poverty. Without adequate insurance, lenders would not provide farmers with insurance policies. Agricultural insurance is a tool that helps farmers to predict the future, to protect the business from unforeseen events, supply and demand fluctuations or various operational challenges. In the case of developing countries such as Albania, these markets are not developed. A main problem in the development of these markets is the lack of demand due to unaffordable prices for farmers. One of the biggest challenges of the agricultural insurance industry is not only providing the right insurance product, but also helping agricultural sector in improving risk management practices to increase production. As Hazell (2009) puts it, many agricultural risks cannot be insured on a financially sound basis, but there is scope for increased insurance of farm assets, of the life and health of rural people, and of some specific perils that affect crop and livestock yields. Such insurance could be efficiently provided by the private sector if governments were to remove some of the important constraints impinging on commercial insurers. The greatest challenge is to find ways of insuring low-income rural households against natural hazards on a financially sound basis.

How to cite: Myslimi, G., Nikolli, E., & Shima, J. (2022). Challenges of Agricultural Insurance Development in Albania. Economicus, 21(2), 31–42.

https://doi.org/10.58944/qocp5468