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A conceptual framework for factors that influence willingness of low-income farmers to pay for weather index insurance in South Africa.

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Weather index insurance is an emerging risk management instrument in the African agricultural landscape designed for low-income farmers that are perpetually vulnerable to weather-related production hazards due to unprecedented intensification in climate variability, particularly in the era of climate change and increasing drought events. Research on weather index insurance in South Africa is still at an embryonic stage, partly attributable to very limited market-based climate risk transfer solutions in the country. However, interest from government and the insurance industry demonstrates a focused approach towards creating more inclusive insurance markets. The purpose of this study was to develop a critical understanding from a behavioural and economic perspective of low-income farmers’ willingness-to-pay for weather index insurance, and to develop a conceptual framework grounded on the Theory of Planned Behaviour for factors that influence these purchase decisions. Quantitative research methods were followed, using a probability sample of 326, from a target population of 1774 low-income maize farmers in the Free State, North West, and Mpumalanga provinces of South Africa. Following stratified random sampling, structured questionnaires were used to collect primary data based on telephonic interactions. From the surveys conducted, a 68.7% response rate was obtained. The data were analyzed using an integrated approach of structural equation modelling and logistic regression to evaluate variables that influence low-income farmers’ willingness to pay for weather index insurance. The study reported that 86% of farmers were willing to purchase the insurance for security reasons to protect their respective businesses and their welfare. The findings revealed that while insurance culture and risk perception were found to have a direct effect on willingness-to-pay, financial capability was not related to purchase intentions. From a socio-economic perspective, access to credit and group membership were significant factors found to have a positive influence on willingness-to-pay. The study advances the understanding of an underserved market and assists in framing future weather index insurance products in the country. One of the main recommendations is that it is important for policymakers to adopt a systemic approach to agricultural financing where insurance plays a critical risk mitigating role in the broader context of agricultural development.


Doctoral Degree. University of KwaZulu-Natal, Durban.