Effect of Village Savings and Loan Associations on adoption of index-based crop insurance under limited liabilities

Abstract

A household survey and focus group discussions were conducted to quantify the general determinants of an index-based crop insurance adoption under limited liabilities in Burundi, and specifically the effect of existing Village Savings and Loan Associations (VSLAs). The survey sample comprised of 40 crop insurance adopters, 40 non-adopters and 40 drop-outs in Bukirasazi and Makebuko communes of Gitega province. The results indicated that saving money (by VSLAs) for upcoming premium payments and regularly VSLA meetings attendance increase insurance adoption with relative risk ratio (RRR)=0.21, p≤0.001) and (RRR=0.01, p≤0.01), respectively. In addition, VSLAs’ members with more knowledge in land management (RRR=0.07, p≤0.05), crop management (RRR=0.05, p≤0.001) and integrated farm planning (RRR=0.03, p<0.05) were more likely to adopt the crop insurance. Furthermore, smallholders being aware and less appreciative limited liability were more likely inclined to adopt crop insurance with RRR=0.12 (p≤0.01) and RRR=0.01 (p≤0.001), respectively. Given the importance of VSLA in fostering crop insurance adoption, we recommend strengthening VSLAs in their operation, save for upcoming premium payments as jointly agreed and set in their constitution, and encourage smallholders to run their farms with integrated farm planning. Due to limited knowledge of smallholders about the mode of crop insurance operation, a more extensive capacity building coupled to a coaching by experts in this domain is more than a necessity.