Tag: crop insurance

Micro-insurance can be an effective approach to smoothening income in adverse times and potentially a way to contribute to the financial inclusion of vulnerable populations. However, direct sales to individual smallholders remains a challenging task without an easily scalable solution. The current research seeks to find the determinants of adoption of a stand-alone coffee index-based insurance product in Uganda marketed by a farmer cooperative, and elicited preferences for improving the design and delivery model. A stratified household survey was conducted among 614 farmers, of which 40% adopted insurance and 62% were member of a farmer cooperative. In odds ratio terms, adopters perceived themselves to be 3.09 times more likely to receive a pay-out than non-adopters (P<0.01), and those having better access to extension services were 2.47 times more likely to adopt a policy (P<0.01). Yet farmers perceiving the design as complex were approximately half as likely to adopt (P<0.05). Farmers preferred the option of premium payments proceeds on delivery, mobile premium payments and delivering insurance through cooperatives/associations. Deepening insurance uptake among coffee farmers will therefore require a strong focus on communication and information sharing facilitated by cooperatives/associations (e.g. farmer cooperates, village and saving associations, or women’s associations).

Linking insurance with credit is a promising approach towards overcoming the main difficulties of scaling up crop insurance in Africa. The current research revealed that credit-linked crop insurance adopters in Mali were on average larger households than non-adopters, were living more often from subsistence agriculture, were less patient and less likely to produce maize, while operating on smaller farms. However, propensity score matching revealed that changes in terms of production decisions or wellbeing were limited compared to credit-users. To achieve scaling, linking crop insurance with credit should not only be beneficial for banks to limit their exposure (on a mandatory basis), but should become beneficial as well for smallholders (in terms of better access to credit, lower interest rates or less required collateral).