DETERMINANTS OF WEATHER INDEX-BASED INSURANCE ADOPTION AMONG GHANAIAN FARMERS: INSIGHTS FOR CLIMATE RISK MITIGATION AND SUSTAINABLE AGRICULTURE
Authors: Gloria Opoku Darkoh  , Nicholas Laweh  , Edmund A. Dasori  , Maxwell L Abilla  , Ngozi Orji  , Samuel Junior Amfo  
Published: January 2025

In Sub-Saharan Africa, agricultural insurance products have been piloted to address the connected climatic risks that farmers confront. However, these products, in general, face low rates of adoption in Ghana. Specific determinants and opportunities of weather index-based insurance are evident in the existing literature. However, empirical studies on the effect of the variables in question seem to be lacking. The purpose of this study was to determine whether farmers in Ghana are willing to demand weather index-based insurance and what factors influence crop insurance participation and purchase. The factors under consideration included farmers' trust in financial institutions, farmers' perception of risk, and farmers' perceptions of policy interventions. This study utilized the theory of planned behavior (TPB) to explain the factors that influenced crop farmers' demand for weather index insurance. Based on the objectives of the research, the study adopted the quantitative research approach. In Ghana's Northern and Southern Savanna regions, a purposive sample technique was used to survey two hundred and three (203) farmers. The variables that affected the likelihood of farmers requesting weather index insurance were identified using Ordered Probit econometric models.
The empirical results from the crop farmers show that farmers' trust in financial institutions, farmers' perceived risk, and farmers' perception of public policy were significant predictors of weather index insurance demand.
The study found that farmers' trust in financial institutions and perceptions of public policy positively affected the probability of demanding weather index-based insurance. On the contrary, farmers' perceived risk negatively affected farmers' likelihood of demanding weather index insurance. The ordered probit regression analysis showed a significant difference between agroecological zone (p-value = 0.020, z = -2.31), maize crop (p-value = 0.022, z = -2.13), farming experience (p-value = 0.038, z = 1.92) and educational background (p-value = 0.042, z = 1.83) in farmer's willingness to demand weather index insurance.
The study finds that farmers with a high level of perceived risk are less likely to demand for weather index-based insurance. Also, farmers with a high level of trust are more likely to demand for weather index-based insurance. Finally, farmers who view policy interventions to be effective are more likely to demand extra weather index-based insurance.
The findings provide useful insight for government agencies and policymakers to review existing policies and introduce new ones that would encourage the participation of weather index insurance. Also, insurers can take a clue from the findings to draw up effective programs and workshops that would train farmers on better risk management strategies through the adoption of weather index insurance products. The study recommends the government improve the infrastructure and the quality of weather data. The study also suggests future studies to focus on farmers' saving and access to credit facilities on adopting weather index-based insurance.
KEYWORDS: Weather Index-Based Insurance, Climate Risk Mitigation, Sustainable Agriculture, Farmer Perceptions, Trust in Financial Institutions