1. 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

2. Introduction Economic Research Problem Objectives Hypotheses Methodology Results Contribution to Knowledge

3. 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.

4. 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.

5. 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.

6. 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

7. 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.

8. 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

9. 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) 110280 Which ONE would you choose?

10. 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).

11. VariableSmall scale farmer Large scale farmer Pooled Mean age (yrs) 42.7148.9444.98 Mean educ. (yrs) 10.3611.3910.73 Mean income (Ksh/month) 16, 174.0081, 860.0040, 040.00 Access to credit (last 12 months, %) 22.5044.0030.30 Awareness about crop insurance (%) 31.9043.1036.00 Membership to devpt. group (%) 46.1053.2048.70 Average farm size (acres) 2.5322.199.67

12. AttributeCoefficientStd. ErrorP-value LEVCOVME 1.7570.6190.0045 LEVCOVHI 3.2490.9250.0004 COMPENMED 3.4011.1190.0024 COMPENHI 4.7261.2660.0002 CONTJOIN 1.1590.4560.0110 MULTRSK 4.4201.2010.0002 CROPMKT 5.9651.7120.0005 CROPMED 9.0682.6290.0006 PRICE - 0.0210.0060.0009 LL - 664.556Pseudo-R 2 0.496

13. AttributeWTPStd. ErrorP-value LEVCOVME 8629.490.0037 LEVCOVHI 15821.010.0000 COMPENMED 16633.040.0000 COMPENHI 23025.640.0000 CONTJOIN 5713.790.0000 MULTRSK 21620.830.0000 CROPMKT 30024.100.0000 CROPMED 44239.690.0000

14. Farmer categoryKshsStd. Error P-value Small Scale Farmers [Compensation, provider content design, multiple risk cover & crop and medical] 16,7921,836.110.0000 Large Scale Farmers [Compensation, level of coverage, joint content design & single risk cover] 16,6401,825.030.0000

15. 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.