For the first time in the history of Pakistan, banks and insurance companies would formally launch 'Crop Loan Insurance Scheme' from Rabi season. A meeting of the State Bank of Pakistan's Task Force on Crop Loan Insurance Framework on Thursday finally decided to launch the insurance scheme for farmers throughout the country from coming Rabi season. The scheme would provide cover to the borrowers against their losses due to natural calamities up to the amount of outstanding loan and mark up thereon. The insurance companies will charge a maximum of two percent premium for all major field crops and the risk will be covered against excessive rains, hail, frost, flood, drought, and crop related diseases like viral and bacterial attacks or damage by locusts. The scheme will be mandatory for the borrowers of the banks. The Task Force meeting, chaired by Dr Shamshad Akhtar, Governor State Bank of Pakistan, held at SBP, Karachi was apprised that the insurance companies and banks have shown their willingness to start the scheme. The Task Force constituted by the Governor SBP last year under the Chairmanship of President Habib Bank Ltd, was assigned to develop a commercially viable and sustainable Crop Loan Insurance Scheme with the help of all stakeholders to mitigate the risk of losses occurring to agricultural borrowers due to natural calamities and risks of defaults by such borrowers. Dr Shamshad said since major commercial banks and insurance companies have developed their crop insurance programmes/products based on the framework developed by SBP Task Force, therefore, the objective of the Task Force to develop a commercially viable and sustainable Crop Loan Insurance Scheme (CLIS) that can be adopted by the market players has been accomplished. "It is hoped that the scheme will not only facilitate the banks in expanding their outreach of agricultural credit but will also reduce burden on the national exchequer," Dr Shamshad added. During the meeting, the Task Force Chairman Zakir Mahmood explained that development of a market-based system was a challenge particularly in the backdrop of many unsuccessful moves made in the past two decades. Therefore, the Task Force adopted a strategy to review the lessons of international best practices, he said and added that many data series were compiled by SBP on calamities announcements, crop wise, and district wise loan disbursements, size of production loans, data on write-offs and NPLs and other seasonal analysis. The insurance companies also shared the database with the reinsurers abroad and after detailed deliberations, a workable, viable and market-based framework has been formulated, he said. Mahmood pointed out that the proposed framework is based on common denominators acceptable to leading insurance companies and banks. The scheme would provide cover to the borrowers against their losses due to natural calamities up to the amount of outstanding loan and mark up thereon. The representatives of the insurance companies said that after successful implementation, the insurance cover will also be extended to the non-borrowing farmers. SBP Governor, while thanking the private insurance companies, appreciated the role of the Task Force that has provided a pure commercial and viable solution of crop loan insurance. Dr Shamshad emphasised on the development of a comprehensive database of the experience of insurance companies and banks for reviewing the issues and remodeling of the framework periodically.