The influence of gender and product design on farmers' preferences for weather-indexed crop insurance.

Sonia Akter,Frederick Rossi,Timothy J Krupnik,Fahmida Khanam

doi:10.1016/j.gloenvcha.2016.03.010

Abstract

Theoretically, weather-index insurance is an effective risk reduction option for small-scale farmers in low income countries. Renewed policy and donor emphasis on bridging gender gaps in development also emphasizes the potential social safety net benefits that weather-index insurance could bring to women farmers who are disproportionately vulnerable to climate change risk and have low adaptive capacity. To date, no quantitative studies have experimentally explored weather-index insurance preferences through a gender lens, and little information exists regarding gender-specific preferences for (and constraints to) smallholder investment in agricultural weather-index insurance. This study responds to this gap, and advances the understanding of preference heterogeneity for weather-index insurance by analysing data collected from 433 male and female farmers living on a climate change vulnerable coastal island in Bangladesh, where an increasing number of farmers are adopting maize as a potentially remunerative, but high-risk cash crop. We implemented a choice experiment designed to investigate farmers' valuations for, and trade-offs among, the key attributes of a hypothetical maize crop weather-index insurance program that offered different options for bundling insurance with financial saving mechanisms. Our results reveal significant insurance aversion among female farmers, irrespective of the attributes of the insurance scheme. Heterogeneity in insurance choices could however not be explained by differences in men's and women's risk and time preferences, or agency in making agriculturally related decisions. Rather, gendered differences in farmers' level of trust in insurance institutions and financial literacy were the key factors driving the heterogeneous preferences observed between men and women. Efforts to fulfill gender equity mandates in climate-smart agricultural development programs that rely on weather-index insurance as a risk-abatement tool are therefore likely to require a strengthening of institutional credibility, while coupling such interventions with financial literacy programs for female farmers.

Highlights

Weather related risks are major sources of income fluctuations for rural farm households in low-income countries
Farmer statistics Only three percent of the sampled women did not have any active engagement in maize farming
Interest in the ways in which weather-index insurance (WII) programs could help achieve these goals is growing, with a number of preliminary feasibility studies underway by donor, research, and investment agencies (Ahmed and Hasemann, 2013; Ahmed, 2013; Asian Development Bank (ADB), 2013). None of these efforts explicitly address the potential for gender differences in smallholders’ preferences for WII, instead relying on the a priori supposition that WII will be accepted by men and women farmers, in line with suggestions elsewhere

Summary

Introduction

Weather related risks are major sources of income fluctuations for rural farm households in low-income countries. To buffer against such risks, and to encourage investment in intensified and high-value production, weather-index insurance (WII) is increasingly suggested for smallholder farmers (Collier et al, 2009). WII has been suggested as the “missing link” to de-risk smallholder investment in intensified cropping (Johnson, 2013), especially in the context of climate change (Collier et al, 2009). ‘basis risk’ which arises due to poor correlation between indices and individual farmers’ experiences of crop losses, limits farmers’ initial or sustained investment in WII (Clarke and Grenham, 2013).

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