Back to Library

Examining the Effects of Crop Price Insurance for Farmers in Ghana

Published by:
Online Location
https://www.poverty-action.org/study/examining-effects-crop-price-insurance-farmers-ghana
Publication date
19/01/2011
Number of Pages
3
Language:
English
Type of Publication:
Working Papers & Briefs
Online platforms & databases
Focus Region:
Sub-Saharan Africa
Focus Topic:
Market / Trade
Type of Risk:
Market-related
Type of Risk Managment Option:
Risk transfer
Commodity:
Crops
Author
Innovations for Poverty Action (IPA)
Organization
Innovations for Poverty Action (IPA)

Many small-scale farmers in the developing world face significant income uncertainty, and rural farmers who live from harvest to harvest don’t have much room for error. Variables beyond the farmers’ control, such as fluctuating crop prices, can make a significant difference in how much a family earns for the year.  Farmers may be unwilling to take on additional risks by borrowing and making long-term investments due this uncertainty. This reluctance is thought to contribute to the decision of many farmers not to invest in technologies such as hybrid seeds, fertilizer, or irrigation that could potentially improve crop yields. Many lenders are also extremely wary of extending credit to farmers, fearful that they will inherit the risks inherent to farming. Crop price insurance could help solve this problem, reducing the risk to farmers and providing them with encouragement to make investments in their farms. Lenders, too, may feel more confident in lending to farmers with greater income certainty, facilitating even more capital investments.