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Prospects of Crop Insurance as a Risk Management Tool among Arable Crop Farmers in Ghana

Robert Aidoo (), James Osei Mensah, Prosper Wie and Dadson Awunyo-vitor
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James Osei Mensah: Department of Agricultural Economics, Agribusiness and Extension, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana
Prosper Wie: Department of Agricultural Economics, Agribusiness and Extension, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana
Dadson Awunyo-vitor: Department of Agricultural Economics, Agribusiness and Extension, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana

Asian Economic and Financial Review, 2014, vol. 4, issue 3, 341-354

Abstract: The aim of this study was to assess the willingness of farmers to adopt crop insurance and the critical factors that influence the premium they are willing to contribute towards such a scheme. Two out of the eleven (11) agricultural operational areas in the Sunyani Municipality were selected purposively due to their dominance in maize and cassava production. Four (4) communities were randomly selected from each operational area through balloting and fifteen farmers were then selected from each community through the use of random numbers. A total of 120 farmers were selected from the Municipality for personal interviews to elicit primary information with the help of a structured questionnaire. A binary logistic regression model was used to identify the factors that influence farmers’ willingness to adopt crop insurance as a risk mitigation strategy. A double logarithmic multiple regression model was employed to determine the factors that influence the premium farmers were willing to pay towards a crop insurance scheme. Evidence from the study indicates that majority (76%) of farmers were willing to adopt crop insurance; age of farmer, land tenure system practiced and educational level were found to be the key drivers of crop insurance uptake, ex ante. The study revealed that government subsidy would be required for such an insurance scheme since the premium farmers pledged to pay was quite low and likely to be uneconomical from the perspective of private insurers. It was revealed that on-farm income, farm size, land tenure, educational level and amount of savings by farmers significantly influenced the premium farmers pledged to pay towards a crop insurance scheme. The study recommended periodic training and education of farmers to improve their knowledge on crop insurance as a risk management tool and the need for farmers to save in order to enhance the uptake of crop insurance when it is introduced in the study area.

Keywords: Crop insurance; Logistic regression; Risks; Willingness to adopt (search for similar items in EconPapers)
Date: 2014
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