Increasing agricultural efficiency via technology adoption remains a high priority among development practitioners. One potential tool for furthering this objective is using drought index insurance to increase access to credit.
Index insurance has been heralded as a potential solution to systemic risks faced by smallholder farmers in developing countries by covering risks such as drought, low crop yields, and low market prices. However, adoption has been low in early experiments. Here, willingness to pay for drought index insurance backed loans is investigated using contingent valuation methodology.
Our results demonstrate that on average the sample population has a willingness to pay high enough to sustain a market viable insured loan product without subsidization with 56% of the target population expressing a willingness to pay for an insured loan at the market price.
This presentation took place in University of California Davis, United States describing a three-year research project promoting smallholders to purchase index insurance contracts via coupled credit in Ghana.