An analysis of farmers’ preferences for crop insurance: a case of maize farmers in Swaziland

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Mbonane, Nobuhle Duduzile
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African Economic Research Consortium
Agriculture is an important sector in sub-Saharan Africa, serving as a stimulus for growth and the provision of food security, and assisting in poverty reduction (Food and Agricultural Organization (FAO), 2000). However, food insecurity and poverty remain pressing issues in the sub-Saharan region. According to Cervantes-Godoy et al. (2013), the reasons for food insecurity and poverty are the susceptibility of agriculture to production, policy and price risks which impact farmers’ income and welfare. The smallholder agricultural sector in many countries is the largest contributor to rural economies and to the livelihoods of the majority of the population (FAO, 2005). Agricultural production is subject to various risks, including drought, outbreaks of disease and floods, among others. Climate change is also one of the predominant sources of production risks (Ramiro, 2009). Such risks are experienced by farmers in both developing and developed countries, but they frequently have different consequences in different places (World Bank, 2005). They can influence production choices, agricultural production or farm incomes and can subsequently affect the livelihood of people dependent on agriculture. Furthermore, they may impede future investments and the growth of agricultural businesses. It is therefore imperative to gain a detailed understanding of how these risks affect agricultural production and how they can be mitigated. Smallholder farmers often face challenges caused by uncertain weather conditions, insecure land ownership and restricted access to capital and other farm inputs. Considering the risks associated with agricultural production, banks are unlikely to lend to farmers in disaster prone areas if the shocks can, potentially, result to loan defaults (The Guardian, 2014). Improving smallholder maize production is a vital strategy in addressing the roots of poverty and food insecurity.