Influence of Institutional Arrangements on the Demand for Agricultural Insurance in a Developing Country Context

Abstract

Agricultural insurance is essential for risk management, yet farmers often do not embrace it without appropriate institutional arrangements. Drawing on New Institutional Economics (NIE) theory, this study examines how institutional arrangements influence demand for agricultural insurance using data from 365 randomly chosen farmers from northern Uganda's Nwoya, Zombo, Amuru, and Kotido districts through self-administered questionnaires. Data were analysed using logit models. Findings reveal that farmers are more willing to pay when index insurance is offered through suitable institutional arrangements like input suppliers (IS) and non-governmental organisations (NGOs). The study found that offering insurance through IS and NGOs at sub-county and parish levels was crucial for enhancing DII. Demand is also driven by age, income, risk attitude, education, and farmer experience. The Agriculture Insurance Consortium (AIC) should leverage institutional arrangements trusted by farmers to improve index insurance demand. Government actions to integrate agricultural insurance with IS and NGOs' operations can enhance farmers' access to insurance and achieve inclusive agricultural insurance, improving demand.

Keywords: Institutional Arrangements, Demand for agricultural insurance, Index Insurance, Farmers