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Prospects of crop insurance as a risk management tools among the banana farmers of Nepal
Prakash Kumar Pant

Last modified: 2017-08-17



Farmers are constantly facing risk and uncertain conditions for banana farming in Chitwan district of Nepal. This study was aimed to assess farmers' willingness to join insurance scheme for banana production and factors determining it. A purposive random sampling technique was used to select 120 banana producers (60 with insurance and 60 without insurance) from Chitwan district and structured questionnaire was used to collect data from the respondents. Collected data were analyzed using descriptive statistics for mean, median, frequency, ranking and trend analysis; binary Logit model to identify factors determining crop insurance decision and truncated Tobit model was used to determine factors that influence the premium farmers were willing to pay and join. The study revealed that farmers’ risk aversion behavior, membership in cooperatives and income from agriculture sector were statistically significant and positively determinant for both adoption decision and premium they are willing to pay. Other variables like family type, knowledge on premium subsidy, household members out-migrated to abroad, years of banana farming were found statistically significant determination for farmers decision in banana insurance adoption. Similarly age, year of schooling, loss experiences were significant and positively determinant whereas membership in group was found negatively affected the premium that farmers were willing to pay. The average farmers' Willingness to Pay (WTP) in the banana insurance scheme was Rs. 3609 in the study area. At ideal situation farmers were willing to pay about 52% more. The results revealed that about 68% of the non-insurers were willing to adopt insurance in the near future. The major challenge faced by the farmers to participate in the insurance scheme was documentation difficulty followed by administrative bottlenecks. Amount of premium was not the major issue for the farmers. It is recommended to increase participation of farmers on cooperatives and make the documentation process easy for promoting insurance scheme and increased awareness among banana producers about premium and government subsidy scheme in the insurance.

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