Food Crop Farmers’ Willingness to Participate in Market-Based Crop Insurance Scheme: Evidence from Ghana

Abstract

The study assesses food crop farmers’ willingness to participate in market-based cropinsurance scheme in the Kintampo North Municipal of Ghana, using primary data solicitedfrom 120 farmers in April 2010. The study employed descriptive statistical techniques toanalyze the social, economic, demographic characteristics of farmers as well as their currentrisk management practices. Further, farmers’ willingness to participate in a hypotheticalmarket-based insurance scheme was estimated using the contingent valuation method. Theresults reveal that the mean willingness to pay premium for a hypothetical loss of GH¢ 1,000of farm income is GH¢24.43. The minimum and maximum willingness to pay premium, inthe insurance scheme are GH¢5.00 and GH¢80.00 respectively. The empirical results of theBinary Logit Model reveal that farm size, family size and diversification via livestock arefactors that influence farmers’ willingness to participate in crop insurance. Recommendationsdrawn for consideration by Government of Ghana (Ministry of Food and Agriculture), policymakers, insurance companies, development organizations and non-governmentalorganizations in rural poverty reduction are that the design and implementation of any cropinsurance scheme in the Kintampo North Municipality and areas with similar characteristicsshould consider critical factors such as family size, farm size and livestock activities in thedesign. Further, a weather index-based insurance product should be piloted especially fordroughts and floods while considering the current risk-management strategies employed byfarmers. It is imperative that the Government subsidizes this program in the initial stages toencourage participation in the form of providing weather station equipment that would enableinsurance companies to effectively validate liability claims by farmers.