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Rift Valley Farmers’ Willingness to Join and Pay for Weather Index Based Crop Micro-insurance: the Case of Shashemene District Farmers, Ethiopia

Abstract: 

Weather Index based Crop Insurance has recently emerged as a risk pooling mechanism by both international NGOs and financial institutions in Ethiopia. However, the uptake rate without subsidy is observed to be minimal. Commercial viability of the product is not yet derived the supply that is pioneered by some insurance companies. Demand side study, in this regard, is scarce. Hence, this study deals with determinants of Willingness to Join (WTJ) and maximum Willingness to Pay (WTP) for Weather index based crop microinsurance, on 150 sample respondents, at Shashemene district using Double Bounded Dichotomous Choice Contingent Valuation Method. Heckman’s two-stage econometric estimation procedure is employed to identify the determinants. It was found out that some households prefer either to stay away from participating in micro-insurance scheme or pay a lesser amount of premium, while others do not want to pay since they expect the service either from the government or donors. Farmers were WTP, on average, 12.9%, which is below the average actuarial premium rate of the area. Findings imply that there is a need for government and stakeholders’ efforts to create awareness and provide product literacy for farmers so that the current uptake rate improves. It also implies that, policy on farm land leasing might have an important role on the product adoption rate. It further suggests the need to work on improving efficiency and reducing operational costs to address the issue related to the current premium rate.

Corporate Author: 
Ethipian Economics Association (EEA)
Publisher: 
Ethipian Economics Association (EEA)
ISBN/ISSN: 
978-99944-54-45-7
Primary Descriptors: 

Crop Insurance

Secondary Descriptor: 

Weather

Geographic Descriptors: 
Ethiopia, Shashemene
Cataloge Date: 
10/10/2015
Broad Subject heading: 
Insurance
Call Number: 
330.963 PRO 2015
Serial Key Title: 
Proceedings of the Twelfth International Conference on the Ethiopian Economy
Publication catagory: 
Content type: 
Volume: 
II
Publication date: 
2015-06-01 00:00:00
Conference Place: 
EEA Conference Center
Place of publication: 
Addis Ababa, Ethiopia
Type of material: 
Book
Current frequency: 
Annually
Conference date: 
July 16 to 19, 201