Willingness to participate and pay for index-based crop insurance in Ghana

Abstract

Purpose The purpose of this paper is to assess farmers’ willingness to participate and pay for weather-based index insurance in the Upper East Region of Ghana, and what factors influence the participation and purchase of crop insurance schemes. Design/methodology/approach A survey of 200 farmers in the region was carried out in 2018 to measure demographic information, farm characteristics, risks and risk-management practices and attitudes to crop insurance programs. The survey also captured maximum willingness to pay (WTP) for crop insurance. The double-bounded contingent valuation technique was used to estimate the WTP for crop insurance and the variables that affected WTP. Findings Farmers, in general, had an indifferent attitude to crop insurance in the region, but were willing to participate in the crop insurance programme, and were willing to pay between 7.5 and 12.5 per cent of the cost of growing maize as a premium for crop insurance. Demographic and economic variables did not impact WTP, but attitude towards crop insurance, farm diversification and frequency of drought negatively impacted on the WTP for crop insurance. Practical implications Education programs could be undertaken to improve the attitude and understanding towards crop insurance, as some farmers perceived the programme as not trustworthy, and others did not truly understand the operation of the programme. Social implications Drought can have a significant impact on household welfare, particularly in food insecure countries or regions. Crop insurance can provide a method of securing income for farmers allowing them to purchase food rather than other choices, such as removing children from education to reduce household expenses, improving the long-term welfare of the farm household. Originality/value This paper considers willingness to participate and WTP for a crop insurance programme in Ghana, it is one of a small number of papers that consider attitude to, and willingness to participate and WTP for crop insurance in developing countries. The value of the research is the expanded understanding of farmer attitude to crop insurance and their lack of knowledge of crop insurance operations.

Adoption of rural bank credit programs among smallholder farmers in Ghana: an average treatment effect estimation of rates of exposure and adoption and their determinants

“…The value of ATnormalE1 (0.642) suggests that not all the exposed farmers accessed credit from rural banks. This finding is consistent with Adjabui et al (2019), who assessed the willingness of farmers to participate and pay for index-based crop insurance in Ghana and found that some farmers did not take up the crop insurance for several reasons, including farmers’ attitude toward crop insurance.…”

Improving the economic sustainability of Italian Farmer: an Empirical Analysis of decision-making models for insurance adoption.

“…(4) In the Italian agricultural insurance system there is not a positive relationship between a farmer's educational background and insurance diffusion. Our result is consistent with Black and Dorfman (2000), Velandia et al, (2009) and Adjabui et al (2019) who, in their studies found a negative relationship between education and crop insurance adoption, but contrasts with those who found a positive relationship between education and crop insurance (Sherrick et al, 2004;Olubiyo et al, 2009;Cole et al, 2013).…”

Agricultural insurance access and acceptability: examining the case of smallholder farmers in Ghana

“…Although agricultural insurance has been discussed for more than 3 decades, with various studies covering accessibility [3,11,16], acceptability [12,17] and willingness to pay for agricultural insurance [18][19][20], the dedicated literature on agricultural insurance covering the global south and particularly Ghana remains scanty. Even with the few studies that focused on Ghana, they remained largely skewed towards northern Ghana [18,21]. Choudhary and D' Alessandro [22] indicated the most studies focused on Northern Ghana because it constitutes a region that is most prone to climate variability (floods, droughts, intense sunlight).…”