MAIZE FARMERS' WILLINGNESS TO PARTICIPATE IN DROUGHT-INDEX INSURANCE FOR CROPS IN NORTHERN REGION OF GHANA

Abstract

The study was conducted in the Tolon and Kumbungu districts as well as in the Savelugu Municipal in the Northern Region of Ghana. By multistage sampling procedure, data from 315 farmers in 15 communities was used for the study. Multistage sampling procedure was employed in this study to identify the study areas, communities and respondents. The data collected was used in analyzing willingness to participate in drought-index insurance for crops, perceptions of farmers as well as constraints farmers may face in subscri bing to crop drought-index insurance. Farmers' willingness to participate in a hypothetical market- based drought-index insurance scheme was analyzed using the contingency valuation method (CVM). The study also identified the determinants of maize farmers' household annual WTP amount using the Binary Pro bit Model (BPM). The method of analyzing farmer's constraints involved the use of the Kendall's Coefficient of Concordance. A Likert Scale was used to analyze farmers' perception about crop index insurance. The results reveal that the mean willingness to pay premium amount by a maize farmers in the northern region annually per an acre of maize farm for crop drought-index insurance is GHS 70.10. From the BPM results, sex, age, education, insurance awareness, regular payment of insurance premium, land ownership, farming methods, farm risk level, damage caused by an event, women contribution, income, and mean perception index of crop insurance are factors that significantly influence the WTP amount for crop drought-index insurance. In order of importance, the farmers ranked the following as possible constraints that may affect their decisions to actively participate in crop drought-index insurance: Crop-index insurance reliability; lack of education on crop insurance; cost of insurance; limited crop- insurance markets and the fact that crop insurance may cover only basic risks. A Kendall's coefficient of 65% was recorded, which means that 65% of the respondents agreed on the ranking. Most of the respondents declared that crop index insurance is a production risk management tool that can be used to combat the negative effects of climate change on their farms and livelihood as a whole. The study concluded that, the most preferred crop insurance package is the public insurance and government subsidy as the highest rank coping strategy. It was then recommended that government plays a very significant role to encourage participation by farmers to effectively mitigate against climate change.