An analysis of farmers’ preferences for crop insurance: a case of maize farmers in Swaziland
Creators: name: Mbonane, Nobuhle Duduzile
Publisher: name: Unknown
Year: 2018
Subjects: subject: Risk and Uncertainty
subject: Farm Management
subject: binary logistic
subject: interest to purchase
subject: maize farmers
subject: preferences for crop insurance
subject: probit model
subject: risk
subject: Swaziland

description: The uncertain nature of agricultural production makes risk management essential in providing farmers with protection against potential losses. Crop insurance is a sustainable risk management tool that ensures the sustainability of agricultural enterprises by reducing income risks. The main focus has been on the supply and penetration of crop insurance, with limited attention paid to the demand and to farmers’ preferences for crop insurance. In Swaziland, the crop insurance industry is still under-developed; hence, an empirical gap exists in knowledge of farmers’ preferences for crop insurance. This study identifies the conditions that farmers prefer to accept with regard to crop insurance, as well as the factors that influence them in purchasing it. It provides an understanding of the need of farming households for crop insurance, and seeks to identify the best ways of protecting farmers’ livelihoods from agricultural risks. It also provides an account of the effects of ineffective risk management strategies. The study employed descriptive statistics to analyse primary data: snowballing sampling methods were used to collect survey data from 150 households in the Hhohho and Lubombo regions of Swaziland. Results show that 52% of the sampled households expressed an interest in purchasing crop insurance; the other 48% were not interested in purchasing crop insurance and gave reasons for this. The probit model was used to determine the factors that influence the likelihood of farmers indicating an interest in purchasing crop insurance: these included gender, marital status, occupation, education, location, savings and farming experience. Farmers based their preferences on crop insurance features such as risk cover, coverage levels and the nature of cover, compensation and vi premiums. Binary logistic regressions were used to identify factors that influence farmers’ preferences regarding crop-insurance features. Respondents preferred the multi-peril crop insurance cover, higher coverage levels, lower premiums and compensation based on market price. They also wanted their coverage to include both crops and livestock, and to be involved in the designing of crop insurance programmes. A lack of farmer education regarding the purpose and benefits of crop insurance was one of the causes of farmers’ lack of interest in purchasing crop insurance. Evidence from this study indicated that farmers in the Lubombo region were more interested in crop insurance than farmers in the Hhohho region. This was predictable, considering that the more risk or uncertainty farmers face, the more likely they are to show an interest in purchasing a sustainable risk management strategy like crop insurance. Farmers are currently more responsive to crop insurance and their preferences are important in informing the ex-ante design process and finding ways of improving crop insurance programmes in Swaziland. This study recommends education for farmers on the role and benefits of crop insurance; it also suggests that the Swazi government to consider implementing crop insurance subsidies and engage with insurance providers to tailor programmes to meet the needs and constraints faced by farmers. Understanding farmers’ preferences for particular attributes of crop insurance is imperative in informing and designing improved insurance contracts.