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Creating Safety Nets Through Semi-Parametric Index-Based Insurance: A simulation for Northern Ghana

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Publication date
25/07/2007
Number of Pages
26
Language:
English
Type of Publication:
Studies
Focus Region:
Sub-Saharan Africa
Focus Topic:
Climate / Weather / Environment
Gender / Youth / Social Inclusion
Type of Risk:
Weather & Climate related
Commodity:
Crops
Author
Vasco Michiel Molini, Michiel Keyzer, Bart van den Boom, Wouter Zant
Organization
European Association of Agricultural Economists

This paper reviews the agricultural risk situation in Ghana and the way in which index-based insurance might contribute to bettering it, focusing on the estimation of a crop indemnification scheme for farmers in Northern Ghana. It recalls that in a poor rural area like Northern Ghana, provision of social safety basically coincides with food security management, and must, therefore, distinguish three basic subtasks: distributing income entitlements (possibly indemnification payments from insurance) to the poor, ensuring collection of taxes (possibly insurance premiums) to fund the arrangement, and assuring delivery of staple goods, such as food to the all households, including the poor. The main remark is, however, that unless the actual availability of goods is assured, the indemnification from crop insurance will under droughts only cause prices to rise and channel away scarce food from the uninsured to the insured.