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Farmers’ Willingness to Pay for Crop Insurance: Evidence from Eastern Ghana

Author

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  • Ellis, Emmanuella

Abstract

Crop insurance is a risk management tool with the potential of dealing with risk more efficiently. This study uses a dichotomous contingent valuation method to elicit the willingness to pay for crop insurance among cereal farmers in the Eastern region of Ghana. The study employed descriptive statistical techniques to analyze primary data obtained from 208 sampled farmers in the region. Approximately, 52.9% of the farmers expressed interest in crop insurance. A Heckman two stage approach was employed to estimate the factors influencing the WTP for crop insurance. The results revealed that farmers were willing to pay approximately $18.36 per cropping season. The demand for insurance was found to be negatively correlated with the premium amounts suggesting that it is a normal good. The Probit model revealed that marital status and awareness of crop insurance had a positive correlation with the willingness to purchase insurance. The coefficient for education was positive and statistically significant at the 5% significance level in relation to farmers’ WTP. Borrowing and savings were, however, found to be negative and significant at the 1% and 10% levels respectively in relation to WTP. Farmers’ WTP amount estimated with the interval regression model was shown to be influenced by key variables such as age, crop type, farm size, farm experience, income, weather variation, savings and access to extension agents. Innovative insurance products and the appropriate distribution channels are also recommended to incite demand for crop insurance.

Suggested Citation

  • Ellis, Emmanuella, 2017. "Farmers’ Willingness to Pay for Crop Insurance: Evidence from Eastern Ghana," International Journal of Agricultural Management and Development (IJAMAD), Iranian Association of Agricultural Economics, vol. 7(4), September.
    • Handle: RePEc:ags:ijamad:292508
    DOI: 10.22004/ag.econ.292508
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    Cited by:

    1. Eric Le Fur & J. François Outreville, 2021. "Real Options and Reduction of Basic Risk of Index‐Based Climate Agricultural Insurance," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(4), pages 1658-1671, December.
    2. Raynold Runganga & Clever Mumbengegwi, 2020. "A Double-hurdle Model Estimation of Smallholder Commercial Farmers’ Willingness to Adopt Crop Insurance in Zimbabwe: A Case of Mazowe district," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 7(9), pages 339-349, September.
    3. Zakaria, Abraham & Azumah, Shaibu Baanni & Appiah-Twumasi, Mark & Dagunga, Gilbert, 2020. "Adoption of climate-smart agricultural practices among farm households in Ghana: The role of farmer participation in training programmes," Technology in Society, Elsevier, vol. 63(C).

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