FACTORS DETERMINING SMALLHOLDER FARMERS' WILLINGNESS TO PAY FOR CROP INSURANCE: THE CASE OF AGARFA WOREDA

The main objective this research is to examine factors determining smallholder farmers’ willingness to pay for crop insurance: the case of Agarfa Woreda, Bale zone. This study therefore provides an understanding of the need of farming households for crop insurance, and seeks to identify the best ways of protecting farmers’ livelihoods from agricultural risks. In this study, mixed research design was employed to objectively answer the proposed research questions. Thus, both quantitative and qualitative data were employed in the study for the understanding of the complete picture of factors determining farmers’ willingness to pay for crop insurance in the district and appropriate data collection instruments were needed. Primarily data was gathered by using data collection tools such as questionnaires and interviews. A multistage random sampling technique was employed to carefully identify crop producing farmers from each kebeles.The total populations of Households are 6693 crop producing farmers in the three kebeles of Agarfa woreda. From total population a sample of 198 respondents for this study were selected. The quantitative data that obtained through questionnaires were analyzed using SPSS descriptive statistics tool. In this study a bid iteration contingent valuation method was used to elicit the willingness to pay for crop insurance among crop producing farmers. The results revealed that farmers were willing to pay approximately 514 ETB for crop insurance per annum. The Logistic Regression model revealed that awareness of crop insurance, farm size, income, education and access to extension service had a positive correlation with the willingness to purchase insurance and statistically significant at the 5% significance level. Gender, Age, Farming experience, household size and crop insurance availability had a negative correlation to the willingness to purchase insurance and were not statistically significant. The coefficient for access to credit was positive and statistically insignificant. The results of the study indicated that the majority of farmers were not aware of crop insurance in relation to its nature, its availability and its accessibility. It is recommended that they had to be given a brief description of what crop insurance is and how it works. Government could also combine its incentives with farmer support services, since this would result in an increase in production and a transition from subsistence to commercial farming.2