The Determinants of Food Crop: Farmers’ Willingness to Pay in a Hypothetical Crop Insurance Product (A Case Study of District Nowshera, Pakistan)

Abstract

This research evaluates willingness to pay decision (WTP) of food crop farmers for a hypothetical crop insurance product in district Nowshera of Pakistan. In the research, data was collected from 203 farmers through a well-structured questionnaire in May 2020. The farmers’ socio-economic and demographic characteristics along with their level of religiosity and risk perceptions were analyzed with the help of descriptive statistics. Moreover, the contingent valuation method was used to analyze the farmers’ WTP decision for a hypothetical crop insurance product. The observed results of Logit model showed that livestock, non-farm’s income, farm’s debts and level of religiosity were the significant factors of farmers’ WTP decision. Recommendations drained for attention by Food & Agriculture Ministry of KP Govt. of Pakistan, insurance companies, non-governmental and development organizations that involved in poverty reduction of rural area to design and implement crop insurance product in district Nowshera of Pakistan and areas of similar characteristics should consider the significant factors of this research. Moreover, due to the negative impact of farmers’ level of religiosity on their WTP decision, this study strongly recommending that an Islamic based crop insurance product could be a better choice for healthy participation of farming community in the study area. Besides, this research also suggests that at initial stages, the government should subsidize crop insurance product for encouragement of farmers’ participations in the study area.