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The Impact of Commercial Rainfall Index Insurance: Experimental Evidence from Ethiopia

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  • Shukri Ahmed
  • Craig McIntosh
  • Alexandros Sarris

Abstract

We present the results of an experiment introducing commercial rainfall index insurance into drought‐prone farming cooperatives in Amhara Region, Ethiopia. We provided a market‐priced rainfall deficit insurance product through producer cooperatives and tested a number of potential ways to kick start private demand. Take up of the insurance at market prices is very low, between 0.5% and 3% across seasons. When we use a randomized experiment to distribute small free insurance contracts to farmers, 39% of subsidized individuals enroll but this fails to stimulate input use, yields, or income, nor does it enhance demand in subsequent seasons. A training and promotion on the product improves uptake and willingness to pay but also does not improve farming outcomes. We conclude with a case study of our efforts to interlink index insurance with credit for agricultural inputs.

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  • Shukri Ahmed & Craig McIntosh & Alexandros Sarris, 2020. "The Impact of Commercial Rainfall Index Insurance: Experimental Evidence from Ethiopia," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(4), pages 1154-1176, August.
    • Handle: RePEc:wly:ajagec:v:102:y:2020:i:4:p:1154-1176
    DOI: 10.1002/ajae.12029
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    4. Mingyu Hu & Fujin Yi & Hong Zhou & Feier Yan, 2024. "The More the Better? Reconsidering the Welfare Effect of Crop Insurance Premium Subsidy," Agriculture, MDPI, vol. 14(11), pages 1-19, November.
    5. Gumilang Aryo Sahadewo & Jeffrey Drope & Qing Li & Firman Witoelar & Raphael Lencucha, 2020. "In-and-Out of Tobacco Farming: Shifting Behavior of Tobacco Farmers in Indonesia," IJERPH, MDPI, vol. 17(24), pages 1-16, December.
    6. Qingxia Wang & Yim Soksophors & Angelica Barlis & Shahbaz Mushtaq & Khieng Phanna & Cornelis Swaans & Danny Rodulfo, 2022. "Willingness to Pay for Weather-Indexed Insurance: Evidence from Cambodian Rice Farmers," Sustainability, MDPI, vol. 14(21), pages 1-17, November.
    7. Andrey Samarskly & Maria Waldinger, 2024. "EU Development Policy and Climate Change," EconPol Policy Brief 61, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    8. Wouter Zant, 2022. "Two Birds with One Stone: Technology Adoption and Market Participation through Protection against Crop Failure," Tinbergen Institute Discussion Papers 22-091/V, Tinbergen Institute.

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