| Abstract: | Weather-Index-based Crop Insurance scheme has emerged as a risk pooling
mechanism by both international NGOs and financial institutions in Ethiopia.
However, the take up rate without subsidy is very minimal and even some were
terminated after a pilot period; commercial viability of the product is not yet
driving the supply that is pioneered by some Insurance companies. Demand side
study, in this regard, is scarce. Hence, this study deals with determinants of
Willingness to Join (WTJ) and Willingness to Pay (WTP) for Weather-index-based
crop microinsurance on 150 sample respondents, at Shashemene district using
Double Bounded Dichotomous Choice Contingent Valuation Method. Heckman
two-stage econometric estimation procedure was employed to identify the
determinants. It was found that some households prefer either to stay away from
participating in microinsurance scheme or pay lesser amount of premium. Those
who did not want to pay the premiumhad claimed that they expect the service to be
provided either by the government or donors. On average,only 12.9% of farmers
were willing to pay for the service, which is below the average actuarial premium
rate of the area. Study findings imply that there is a need for the government and
other stakeholders to exert more effort towards farmers’ awareness and product
literacy so that the current take up rate improves. It also implies that, policy on
farm land leasing might have an important role on the product adoption rate. |
