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Crop Price Indemnified Loans for Farmers: A Pilot Experiment in Rural Ghana

Crop Price Indemnified Loans for Farmers: A Pilot Experiment in Rural Ghana Abstract Farmers face a particular set of risks that complicate the decision to borrow. We use a randomized experiment to investigate (1) the role of crop‐price risk in reducing demand for credit among farmers and (2) how risk mitigation changes farmers’ investment decisions. In Ghana, we offer farmers loans with an indemnity component that forgives 50 percent of the loan if crop prices drop below a threshold price. A control group is offered a standard loan product at the same interest rate. Loan uptake is high among all farmers and the indemnity component has little impact on uptake or other outcomes of interest. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Risk and Insurance Wiley

Crop Price Indemnified Loans for Farmers: A Pilot Experiment in Rural Ghana

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References (44)

Publisher
Wiley
Copyright
© The Journal of Risk and Insurance, 2011
ISSN
0022-4367
eISSN
1539-6975
DOI
10.1111/j.1539-6975.2010.01406.x
Publisher site
See Article on Publisher Site

Abstract

Abstract Farmers face a particular set of risks that complicate the decision to borrow. We use a randomized experiment to investigate (1) the role of crop‐price risk in reducing demand for credit among farmers and (2) how risk mitigation changes farmers’ investment decisions. In Ghana, we offer farmers loans with an indemnity component that forgives 50 percent of the loan if crop prices drop below a threshold price. A control group is offered a standard loan product at the same interest rate. Loan uptake is high among all farmers and the indemnity component has little impact on uptake or other outcomes of interest.

Journal

Journal of Risk and InsuranceWiley

Published: Mar 1, 2011

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