dc.description.abstract | Agricultural risk management is very important in protecting farmers against the vagaries of
weather. The initial stage in risk management is the identification of the perceived risk followed by
application of various agricultural mitigation strategies. The risk mitigation strategies available to
farmers fall under three categories, focusing on financial, production and marketing aspects. While
production risk management involves enterprise diversification and appropriate farm management
practices, the marketing aspect involves forward contracting, hedging on futures markets, and
selling price and minimum price contract. The financial facet of risk management comprises offfarm
employment and crop insurance. Besides these, other alternatives including diversification of
enterprises such as relying on public assistance or dependence on income outside agriculture are
used.In Kenya, agricultural insurance is still at a pilot stage after an unsustainable effort in the
1970’s. Despite the noble intervention to develop the crop insurance industry in Kenya, there exists
an empirical gap in knowledge on farmers’ preferences for the service. In order to address the
aforementioned knowledge gap, the study employed the Choice Experiment (CE) method to assess
farmers’ preferences for crop insurance design features. The application of CE facilitated the
estimation of willingness to pay (WTP) and policy scenarios that represent a useful method to
inform policy design in a developing country context. The study site was Trans-Nzoia County, a
major maize producing region in Kenya. The analysis employed a random parameter logit model
(RPL). The results show that farmers are willing to pay for various features of crop insurance.
Some of the important attributes were level of coverage, compensation, content design, risk cover,
nature of coverage and price. Further, small scale farmers had higher WTP values than those of
their large scale counterparts. This was a plausible expectation considering that small scale
farmers are relatively more prone to vagaries of nature and resource constraints that hinder their
diversification efforts compared to the large scale farmers. The insights on farmers’ preferences
are important in informing ex-ante design and improvement of crop insurance programmes in
Kenya and other countries that face climate-related challenges and other agricultural risks. | en_US |