Evaluation Of Cash Crop Farmers' Willingness To Pay For Crop Insurance

Agriculture sector is the backbone of national economy in Pakistan,which contributes almost 20.9 percent to national GDP and creates employment for about 45 percent of total labor force in the country that supports 67 percent population for their nourishment.It has a key role in catalyzing overall economic growth,ensuring food security,structural changes in economy towards industrialization and eradication of poverty.Livelihood of the people and overall economy depend on agriculture production and farm income.Almost 70 percent population of Pakistan are living in rural areas and most of them are dependent on agriculture sector.In recent years,natural hazards related to climate change have become more severe and frequent.Increase in severity and frequency of floods,hails,droughts,variation in precipitation and other climatic related events due to climate change have reduced livelihood of small subsistence farmers in developing countries.The agricultural sector in Pakistan has faced continuous three rapid massive floods that devastated the overall economy and agriculture sector.A rapid growth in farming sector supports the poverty reduction and may provide livelihood to the farmers.Despite of agriculture sector contribution to the economy of Pakistan,the country's farming sector is still under developed.This dissertation explores the farmers preference a market-based crop management strategy in agriculture system in multidimensional outlooks in Pakistan.Specifically,it investigates the farmers willingness to pay for the potential of a crop insurance scheme as risk management strategy in Khyber Pakhtunkhwa(KP)province of Pakistan.In addition,it investigates the major factors affecting farmers' crop insurance purchases decision,and their risk perception and attitude towards various risks.This study was based on primary as well as secondary data collected from four flood prone district namely Charsadda,Mardan,Nowshera,and Peshawar of Khyber Pakhtunkhwa province,Pakistan during January 2017 to March 2017.The primary data were collected using surveyed questionnaires and group discussions.Secondary data were collected from online reports,magazines,and books.Multiple sampling techniques and different econometric techniques/approaches were used to fulfil objectives of the study.In order to investigate farmers' willingness to pay(WTP)for crop insurance program as risk mitigating tool,contingent valuation method(CVM)approach was utilized.Further,linear regression model was utilized to check construct validity and reliability of the WTP estimates.To identify the major factors influencing farmers' crop insurance purchases decisions,probit model technique was employed.Equally Likely Certainty Equivalent Method(ELCEM)and Risk Matrix techniques were utilized in determining the risk attitude and risk perceptions among the farmers.Findings of the study revealed that about 30% of the participants accepted the concept of crop insurance as the mechanism for disaster risk reduction.Our findings indicated that the severity and frequency of past weather associated extremes,farm typology,socioeconomic settings,and the ability of farming communities to pay should be considered while introducing crop insurance programs in the region.The findings of our research showed that age,farming experience,education level,risk perception of floods,land ownership status,landholding size,access to credit,access to information sources,agricultural extension services,and distance from river were the significant factors associated with farm households' decisions to purchase crop insurance.Further findings of this study showed that majority of the farmers were risk-averse,and floods,high input prices,crop diseases and excessive precipitation were the main risks perceived by the farmers.Results of the probit regression model indicated that age,education level,farm location,off-farm income and access to market information were the main factors that affect the farmers' risk attitude and perceptions.Findings of this study revealed that there is a significant scope of crop insurance scheme in Pakistan.Insurance providers and government agencies must realize the importance of crop insurance for agriculture sector,designing more crop insurance programs that meet the needs of vulnerable rural households.Further the government should subsidize crop insurance schemes that may increase the demand for crop insurance in Pakistan to stimulate adoption of the scheme.The government agencies and insurance providers should ensure knowledge and awareness dissemination to farmers through the electronic and print media in the form of extension services.The meteorological department should provide prior information regarding extreme climatic events that can protect the rural farm households from the adverse possessions of natural disasters.