Effect of Crop Insurance and Financing on Productivity of Wheat Farmers in Narok County

Abstract

This project aimed at exploring the effect of crop insurance and financing on productivity of wheat farmers in Narok County. Specifically, the study sought to establish the loan amounts and customer numbers by financial institutions as well as the insurance premiums on the large scale farmers within Narok County. The study was founded on four main theories including pecking order, insurance risk, working capital and productivity growth. A field study involved application of descriptive research design through which 20 large scale farmers registered with Cereal Growers Association of Kenya (CGAK) were sampled. The instrument of data collection was a structured questionnaire administered using field assistants who approached the farmers through a drop-and-pick system. The study found that 53 percent of farmers did not have consistent insurance before 2010 while all of them had insurance by 2015. Similarly, only 67 percent of the farmers had direct bank loans before 2010 while all of them had an attachment to a loan bank. It was also found that productivity had gone up by 11 percent. In conclusion, the study noted that both insurance and financing had a positive effect on productivity with a significance level of 0.02 when combined. However this declined when considered individually with insurance having a significance value of 0.04 and insurance fairing better at 0.03. The study therefore recommended that insurance premiums should be reviewed in order to encourage farmers take up more packages of the instrument. Another recommendation was that lending conditions should be relaxed to enable more farmers take up larger loan amounts. Finally, the study recommended further studies on other factors that could affect wheat productivity apart from insurance and finance including culture, politics, world markets, taxation and government policies.