Examining the Effects of Crop Price Insurance for Farmers in Ghana
Standard Mumuadu procedure is to invite farmers to meet in a group with Mumuadu employees to discuss the bank’s financial services, and to encourage farmers to come to a branch to apply for a loan. The average loan size is approximately US$159, which represents a significant change in cash flow for the borrower. For this project, Mumuadu employees approached community leaders to obtain a list of all maize and eggplant farmers in the village. The same community leaders then invited farmers to attend one of the bank’s information sessions. Farmers on the list were randomly assigned to one of four groups, each of which received a variation on the Mumuadu marketing pitch. The four groups were:
Farmers who were offered the standard Mumuadu loan product;
Farmers who were offered the Mumuadu loan product with complimentary crop price insurance;
Farmers who received financial literacy training, before being offered the standard Mumuadu loan product;
Farmers who received financial literacy training, before being offered the Mumuadu loan product with complimentary crop price insurance.
An estimated 70 percent of the world's poor rely on agriculture for all or some of their household income. Farmers face a number of risks to their livelihoods, including unpredictable weather and crop price variation. These risks may also affect how they choose to borrow and invest to improve their business. The IPA projects in this sector seek to find out how we can help poor farmers in the developing world increase productivity and deal with the risks inherent in farming.