SMALLHOLDER ACCESS TO WEATHER SECURITIES: DEMAND AND IMPACT ON CONSUMPTION AND PRODUCTION DECISIONS

Principal Investigators: Miguel Robles (IFPRI)
Research Team: Andre Butler & R. Isaac Manuel
LEAD Centre: Centre for Microfinance (CMF)
Focus Area: Insurance & Pensions
Project Geography: Bhopal , Dewas & Ujjain Districts of Madhya Pradesh , India
Partner: 3ie. IFPRI, HDFC ERGO General Insurance Company Ltd., India
Status: Completed

Background:

The inherent risks of weather induced crop failure often deter farmers from investing in profitable technologies. Anticipating these risks, some farmers employ low return, low risk production strategies locking themselves into a poverty trap. As a result, risk alleviation technologies such as crop insurance have been identified as a potential catalyst for farmer’s adoption. Yet in many cases adoption of crop insurance products has remained low. One of the reasons hypothesised for the low demand and take-up of traditional index based insurance products is the inherent complexity of the products, which make them difficult for farmers to perceive the direct benefits. To address this issue, this study aims to test a simple, transparent and flexible weather index insurance contract in the form of weather securities was conceptualized. The product was launched during two consecutive summer agricultural seasons (known as Kharif in India) in 2011 and 2012. The objective of this project was to evaluate the potential of this new weather index insurance product in satisfying the insurance demands of small farmers. In addition, the project also aims to address responsiveness of insurance demand by small holder farmers to a set of interventions, namely price discounts, weather stations and insurance literacy.

Related Resources

REPORT- Smallholder access to weather securities in India: demand andimpact on production decisions
TRAINING MANUAL – Weather Index Insurance Training Manual
BASELINE REPORT – Baseline Report