Weather index insurance, agricultural input use, and crop productivity in Kenya
- 32 Downloads
Weather risk is a serious issue in the African small farm sector that will further increase due to climate change. Farmers typically react by using low amounts of agricultural inputs. Low input use can help to minimize financial loss in bad years, but is also associated with low average yield and income. Increasing small farm productivity and income is an important prerequisite for rural poverty reduction and food security. Crop insurance could incentivize farmers to increase their input use, but indemnity-based crop insurance programs are plagued by market failures. This article contributes to the emerging literature on the role of weather index insurance (WII). We use data from a survey of farmers in Kenya, where a commercial WII scheme has been operating for several years. Regression models with instrumental variables are used to analyze WII uptake and effects on input use and crop productivity. Results show that WII uptake is positively and significantly associated with the use of chemical fertilizer and improved seeds, and also with crop yield. We conclude that upscaling WII programs may help to spur agricultural development in the small farm sector.
KeywordsWeather risk Crop insurance Fertilizer Small farms Impact evaluation Africa
This research was undertaken with financial support from the Kenyan National Commission for Science, Technology, and Innovation (NCST) and the German Research Foundation (DFG).
Compliance with ethical standards
Conflict of interest
The authors declare that they have no conflict of interest.
- Ariga, J., Jayne, T. S., Kibaara, B., & Nyoro, J. K. (2008). Trends and patterns in fertilizer use by smallholder farmers in Kenya, 1997–2007. Nairobi: Tegemeo Institute of Agricultural Policy and Development, Egerton University.Google Scholar
- Berhane, G., Dercon, S., Hill, R.V., & Taffesse, A. (2015). Formal and informal insurance: Experimental evidence from Ethiopia. Selected paper for International Association of Agricultural Economists Conference, Milan, 9-14 august 2015.Google Scholar
- Elabed, G., & Carter, M. R. (2015). Ex-ante impacts of agricultural insurance: Evidence from a field experiment in Mali. Davis: University of California.Google Scholar
- Farrin, K., & Murray, A.G. (2014). The effect of index insurance on returns to farm inputs: Exploring alternatives to Zambia’s fertilizer subsidy program. Selected paper for Agricultural and Applied Economics Association meeting, Minneapolis, 27-29 July 2014.Google Scholar
- FSD. (2013). Review of FSD's index based weather insurance initiatives. Nairobi: Financial Sector Deepening.Google Scholar
- Greatrex, H., Hansen, J.W., Garvin, S., Diro, R., & Blakeley, S. (2015). Scaling Up Index Insurance for Smallholder Farmers: Recent Evidence and Insights. CCAFS report no. 14, Copenhagen: CGIAR research program on climate change, agriculture and food security.Google Scholar
- Greene, W. H. (2012). Regression analysis of treatment effects. In Econometric analysis (pp. 930–934). Edinburgh Gate: Prentice Hall.Google Scholar
- IFAD. (2010). The potential for scale and sustainability in weather index Insurance for Agriculture and Rural Livelihoods. Rome: International Fund for Agricultural Development and World Food Program.Google Scholar
- IFC. (2015). Agriculture and Climate Risk Enterprise (ACRE) - Kilimo Salama - Kenya, Rwanda, Tanzania. Retrieved November 13, 2015, from International Finance Corporation: http://www.ifc.org.
- Kathage, J., Kassie, M., Shiferaw, B., & Qaim, M. (2016). Big constraints or small returns? Explaining nonadoption of hybrid maize in Tanzania. Applied Economic Perspectives and Policy, 38, 113–131.Google Scholar
- Shiferaw, B., Obare, G., & Muricho, G. S. (2009). Leveraging institutions for collective action to improve markets for smallholder producers in less-favored areas. African Journal of Agricultural and Resource Economics, 3(1), 1–18.Google Scholar
- Sibiko, K.W., Veettil, P.C., & Qaim, M. (2018). Small farmers’ preferences for weather index insurance: Insights from Kenya. Agriculture and Food Security, 7(53), https://doi.org/10.1186/s40066-018-0200-6.
- Sina, J., & Jacobi, P. (2012). Index-Based Weather Insurance: International & Kenyan Experiences. Nairobi: Adaptation to climate change and insurance (ACCI).Google Scholar
- World Bank. (2008). World development report: Agriculture for development. Washington, DC: The World Bank.Google Scholar