PRESENTED BY: OLILA Dennis Opiyo 1 Nyikal Rose Adhiambo Otieno David Jakinda Presentation prepared for the African Economic Research Consortium (AERC) Thesis Dissemination Workshop Egerton University, 24 – 25 th June 2014

Introduction Economic Research Problem Objectives Hypotheses Methodology Results Contribution to Knowledge

Maize is the most important staple food in Kenya. Production accounts for 20% of the gross farm output from small scale farming sector (Jayne et al., 2001). Accounts for 40% of the daily calories with per capita consumption of 98kg. Over 85% of rural population derive livelihood from agric. Most of whom grow maize.

However, production is mainly done under rain-fed agriculture which is constrained by risk and uncertainty. The result is a decline in staple food production & increase in poverty level among farmers (De Groote, 2011). Crop insurance as risk mitigation strategy is in a pilot stage in Kenya, however; o There exists an empirical dearth in Knowledge on farmers’ preferences for the crop insurance programme.

The purpose of this study was to evaluate farmers’ preferences for crop insurance in Kenya. o Specific objectives; i. To analyze farmers’ Willingness to Pay for crop insurance. ii. To assess factors influencing maize farmers’ WTP for crop insurance.

The hypotheses postulated were: o Maize farmers’ in Trans-Nzoia county are not WTP any statistical significant amount of money for crop insurance components. o There known factors affecting farmers WTP for crop insurance features

A multistage cluster random sampling was employed. Primary data collected through a face-to-face interview in the three districts of Trans-Nzoia county. Survey instrument used was a semi-structured questionnaire. Sample size; 300 respondents. Both Choice Experiment (CE) and Socio-demographic characteristics data were collected.

Crop insurance componentsComponent levels Level of Coverage50%, 65%, 70% Compensation50%, 60%, 70% Content design Joint, Provider only Risk CoverSingle peril, Multiple peril Nature of CoverageCrop only, Crop and Market, Crop and other social issues such as medical Cost (Ksh/acre)110, 170, 280

Insurance scheme A Insurance scheme B Neither Scheme A nor B (Status quo) Level of coverage 70%50% Compensation60%50% Content designProvider onlyJoint Risk cover Single perilMultiple peril Nature of Coverage Crop only Crop and medical Cost/acre (Ksh) Which ONE would you choose?

Objective 1: Quantification of WTP o A random parameter logit estimated (RPL). o Specification of the utility model by Revelt and Train (1998) as: o U int = β n X int + ε int. The Marginal WTP was estimated as specified by Hanemann (1984). o WTP = -1*(β k /βp).

VariableSmall scale farmer Large scale farmer Pooled Mean age (yrs) Mean educ. (yrs) Mean income (Ksh/month) 16, , , Access to credit (last 12 months, %) Awareness about crop insurance (%) Membership to devpt. group (%) Average farm size (acres)

AttributeCoefficientStd. ErrorP-value LEVCOVME LEVCOVHI COMPENMED COMPENHI CONTJOIN MULTRSK CROPMKT CROPMED PRICE LL Pseudo-R

AttributeWTPStd. ErrorP-value LEVCOVME LEVCOVHI COMPENMED COMPENHI CONTJOIN MULTRSK CROPMKT CROPMED

Farmer categoryKshsStd. Error P-value Small Scale Farmers [Compensation, provider content design, multiple risk cover & crop and medical] 16,7921, Large Scale Farmers [Compensation, level of coverage, joint content design & single risk cover] 16,6401,

High WTP for nature of coverage; policies that advocate for both crop, mkt & medical aspects in the design. Stakeholder engagement in the design; imply a bottom-up policy formulation approach. Implementation of programme; creation of an enabling environment. Acknowledgment  The authors acknowledge the African Economic Research Consortium (AERC) for funding the study.