- Email: [email protected]
Factors Hindering Pakistani Farmers' Choices Towards Adoption of Crop Insurance
ScienceDirect
June 2015Vol. 22No. 292-96 Journal of Northeast Agricultural University (English Edition)
Available online at www.sciencedirect.com
Factors Hindering Pakistani Farmers' Choices Towards Adoption of Crop Insurance Sidra Ghazanfar1, Zhang Qi-wen1*, Muhammad Abdullah1, Jaleel Ahmed2, Imran Khan3, and Zeeshan Ahmad1 1
College of Economics and Management, Northeast Agricultural University, Harbin 150030, China
2
School of Management, Harbin Institute of Technology, Harbin 150001, China
3
Department of Management Sciences, Harbin Institute of Technology, Harbin 150001, China
Abstract: This study was conducted to analyze the factors that negatively influence Pakistani farmers' willingness to participate in crop insurance. Probit model was applied to identify the significant factors which influenced our dependent variable "not willing to participate". The results of the analyses showed that crop insurance premium was the most influencing factor which had positive and significant impact on dependent variable. Similarly dissatisfaction with crop loan insurance scheme, lacking of knowledge about crop insurance, believing of being against Islamic rules and time taking process was also found to be positive and significantly influenced the dependent variable. While limited decision power and limited perils were not found to be significant in the results. Key words: crop insurance, willingness to participate, Probit model, Premium CLC number: F310
Document code: A
Article ID: 1006-8104(2015)-02-0092-05
districts, 74 are food deficit, in terms of net availability
Introduction
(Abid and Sahib, 2009). Water-stressed condition had increased the condition of food insecurity by reducing
Pakistan is a highly climate sensitive agriculture
the agriculture productivity in arid and semi-arid areas
dependent country where development and growth
of Pakistan (Iqbal, 2013).
of the economy depend on the agriculture sector, as
Hence, the analyses of the situation demand an
agriculture contributes about 21.4% to Gross Domestic
efficient crop insurance market in agriculture system
Product (GDP) and engages about 45% of labor in
which provides the security to agriculture production
agriculture sector (GOP, 2013). Situation of climate
and farmers' income. Although crop insurance market
uncertainty in Pakistan is getting worse and worse day
exists to protect farmers from these disasters, farmers
by day. Pakistan is exposed to a number of natural
seem to be not interested in participating in crop
disasters, including cyclones, floods, drought, intense
insurance. Most farmers in Pakistan, either ignored
rainfall, and earthquakes (TFCC, 2010). Almost one-
or overweighted low probability risks which showed
third of the households is living below the "food
that farmers were more sensitive about their current
poverty line" and the quantity of the food available
outcomes rather than future income risks. There were
to them is not enough to meet their nutritional
several factors for lowing crop insurance market
requirements (Arif and Khalid, 2007) and out of 120
penetration and lowing interest of farmers towards
Received 11 December 2014 Sidra Ghazanfar (1986-), female, researcher, Ph. D, engaged in the research of crop insurance in Pakistan. E-mail: [email protected] * Corresponding author. Zhang Qi-wen, professor, supervisor of Ph. D student, engaged in the research of financial theory and policy. E-mail: [email protected] &NBJMYVFCBPFOHMJTI!OFBVFEVDO
·93·
Sidra Ghazanfar et al. Factors Hindering Pakistani Farmers' Choices Towards Adoption of Crop Insurance
crop insurance, so the purpose of this study was to
schemes. We had used not willing to participate
investigate the factors that negatively influenced, the
(NWTP) as our dependent variable. As not willing
farmers' willingness to participate for crop insurance
to participate was a qualitative dummy dependent
programs.
variable, hence, we could not use Classical Linear Regression Model (CLRM). To avoid the problem
Materials and Methods
of linear probability model of having value beyond the range of zero and one, we could use the Logit and
We had collected the data from Punjab Province of
Probit models. As, these models solved the problems
Pakistan, three districts of Punjab were chosen to
of non-normality of the residuals, heteroskedasticity
conduct the study, namely Dera Gazi Khan, Rajan
and a smaller R-square. Logit and Probit models
Pur, and Bahawalpur. These districts were purposely
produced almost the same results for large samples.
chosen, as they were highly vulnerable to disasters
In this research paper, we had used Probit model,
of flood and drought. From each district, two tehsils
because Asteriou and Hall (2007) had mentioned that
were selected randomly to conduct the survey, among
Probit model was more sophisticated than that of Logit
the farmers of these tehsils. A total of 300 farmers
model. For the present study, the Probit model was
were selected by selecting randomly 50 farmers from
specified as the following:
each selected tehsil. Before they were asked to fill
NWTPi=β0+β1AIRi+β2DISi+β3INAi+β4KISi+β5LDPi+
the questionnaire, a briefing was given to farmers
β6LPi+β7PCi+β8TTPi+β9Agei+εi
about crop insurance scheme, just to make farmers
Where,
familiar with the mechanism and benefits of the crop
NWTPi=Not Willing to Participate was a dummy va-
insurance program. A questionnaire was developed to
riable that was measured as 1 for not willing to parti-
collect the required data regarding the demographics
cipate and 0 otherwise.
of the farmers, their willingness to participate for a
AIRi=Believe of being Against Islamic Rules. It
hypothetical crop insurance program and the factors
was measured as 1 for those who had mentioned it as
that influenced their decision of the participation.
against the Islamic rules and 0 otherwise.
Overall, 300 farmers were asked whether they were
DISi=Dissatisfaction of the farmers was a dummy
willing to participate in the given crop insurance
variable. 1 for dissatisfied farmers and 0 otherwise.
scheme. Out of which 184 farmers responded that
INAi=Inaccessibility was a dichotomous dummy
they were willing to participate in crop insurance
variable that was 1 for those farmers who had not
and 116 farmers replied that they were not willing
access to insurance schemes otherwise 0.
to participate. Those farmers, who refused to partici-
KIS i=Knowledge about Insurance Schemes was
pate in the hypothetical crop insurance plan, were
a dichotomous dummy variable that was 1 for those
asked regarding the factors that influenced their
farmers who had knowledge about insurance schemes
decision of "not willing to participate" for the designed
otherwise 0.
hypothetical crop insurance scheme. This research was
LDPi=Limited Decision Power was also a dummy
an attempt to explore those factors, among the farmers
variable.
in Pakistan.
LPi=Limited Perils was a dummy variable. PCi=Premium Cost was a dummy variable. 1 for
Probit model
those farmers who didn't want to involve/participate
In this research, we had tried to find out the key factors
in insurance schemes due to the high premium 0
which were associated with the decision of farmers
otherwise.
who were not willing to participate in crop insurance
TTPi=Time Taking Process was a dummy variable. 1 IUUQQVCMJTIOFBVFEVDO
·94·
Journal of Northeast Agricultural University (English Edition)
Vol. 22ǂNo. 2ǂ2015
for those farmers which had the opinion that insurance
70 years, with an average age of 43 years. Education
schemes had time taking processes 0 otherwise.
level was found to be low among our sample as the
Agei=Age of a farmer.
average number of educational years was found to
εi=An error term.
be eight years. Household size always remained a massive variable to measure in agricultural research. The household distribution of our sample ranged from
Results
two to nine family members, with an average size of Descriptive statistics
five members in a family. Farm income was calculated
In our study analysis, the age distribution scale of our
in Pakistani Rupees and average farm income was
selected sample ranged from minimum 22 to maximum
found to be 193 793.9 (Table 1).
Table 1 Descriptive statistics
Item
Mean
Median
Max
Min
Std. dev
Age
43.098
42.000
70.0000
23.0000
11.7670
Credit
0.1043
0.0000
1.0000
0.0000
0.3066
Education
7.7307
8.0000
14.0000
0.0000
2.7389
Non-farm income
0.1648
0.0000
1.0000
0.0000
0.3720
Crop diversity
0.2417
0.0000
1.0000
0.0000
0.4293
Farm income
193 793.9
178 192.0
690 000.0
47 301.00
95 570.30
Expected yield
0.1208
0.0000
1.0000
0.0000
0.3268
Land holding
7.8571
7.0000
20.000
3.0000
3.1114
Land tenure system
1.1978
1.0000
3.0000
1.0000
0.4130
Land holding distribution ranged from 2-20 acres
one of the major reasons, which the farmers mentioned
for sample, with an average size of 7.8 acres of
during our survey was to consider insurance schemes
land. About 40% of respondents had 1-5 acres of
against the Islamic jurisprudence. Almost 45% of the
land, 47.6% of farmers had 6-10 acres of land, 6.8%
farmers replied that these insurance schemes were not
of responding famers had 11-15 acres and 5.6%
according to Islamic laws. Another important reason
of farmers had more than 15 acres of land. Most
was the price of the crop insurance, and 60% of the
responding farmers of sample were small farmers,
farmers considered that their participation in crop
because about 90% of farmers in Pakistan were small
insurance would result an increases in their total cost
farmers (GOP, 2010). And 23.6% of farmers had non-
of the production. Limited power to make decision
farm income sources, while the remaining farmers did
was also found to be a major influencing factor as in
not earn non-farm income.
Pakistan families were usually large and combine family
The analysis showed that although majority of
system was common, so decisions were made under
farmers about 61.34% were willing to participate in
the consultancy of other family members. Decisions
crop insurance, but there still existed enough percentage
are made by seeking coordination from the other
of farmers, about 38.66% who were not willing to
family members who were usually senior in age and
participate, which was not a neglect able percentage of
experience, so the consent of other family members
the farmers that should be ignored. There could be a lot
was usually required to make decisions. Similarly,
of reasons for not to participate in insurance schemes,
lacking of proper information about the crop insurance
&NBJMYVFCBPFOHMJTI!OFBVFEVDO
·95·
Sidra Ghazanfar et al. Factors Hindering Pakistani Farmers' Choices Towards Adoption of Crop Insurance
mechanism and benefits and time taking process were
in crop insurance. The frequency distribution of these
found to be important reasons behind not participating
factors is shown in Table 2.
Table 2 Frequency distribution
Variable
No. of observation
Yes
No
Percentage (Yes) (%)
Not willing to participate
300
116
184
38.6667
Against islamic rule
300
136
164
45.3333
Dissatisfaction
300
63
237
21.0000
Lacking of knowledge about insurance scheme
300
138
162
46.0000
Limited decision power
300
154
146
51.3333
Limited peril
300
103
197
34.3333
Premium cost
300
180
120
60.0000
Time taking process
300
163
137
54.3333
Table 3 Results of Probit model
Variable
Coefficient
Standard error
z-statistic
Probability
Constant Against islamic rule Dissatisfaction Lacking of knowledge about insurance scheme Limited decision power Limited perils Premium cost Time taking process McFadden R-square N
2.3762 0.3740 0.3646 0.5280 0.1011 –0.2360 0.9884 0.2791 0.2202 300
0.3921 0.1741 0.2054 0.1675 0.1731 0.1748 0.1805 0.1668
6.0602 2.1479 1.7746 3.1508 0.5841 –1.3493 5.4752 1.6728
0.0000 0.0317 0.0760 0.0016 0.5591 0.1772 0.0000 0.0944
Table 3 represented the results of the estimated Probit
their farms got insured, under this crop loan insurance
model which was applied to analyze the influence of
scheme. Therefore, dissatisfaction with crop loan
above mentioned factors on farmers' decision of "not
insurance scheme was also found to be positively and
willing to participate" (NWTP) in crop insurance.
significantly related to not willing to participate in
Almost 98% population of Pakistan was Muslim. In
crop insurance.
the religion of Islam, the interest was strictly forbidden, so most of the farmers do not believe in conventional
Discussion
banking as well as in insurance schemes. We had found that our first independent variable "Against
Lacking of proper knowledge about crop insurance
Islamic Rule (AIR)" was positively and significantly
concepts, its features and benefits were found to be
related to our dependent variable "NWTP". This could
one of the important factors that negatively influenced
also be one of the reasons behind dissatisfaction of
farmers' willingness to participate in crop insurance
farmers with currently running crop loan insurance
program. Farmers perceived it was difficult to under-
scheme. Crop loan insurance scheme was a mandatory
stand about the procedures, policies and risk manage-
program, all the farmers whether they were interested
ment mechanism of crop insurance. Low literacy
or not, if avail agriculture credit loan from banks,
rate among farmers was one of the reasons that IUUQQVCMJTIOFBVFEVDO
·96·
Journal of Northeast Agricultural University (English Edition)
made it was difficult for farmers to understand the
Vol. 22ǂNo. 2ǂ2015
dependent variable "not willing to pay".
concept of formal risk management measures, such as crop insurance schemes that was why lacking of
Conclusions
Knowledge about Insurance Schemes (KIS) was also positively and significantly related with not willing to
The analyses revealed that low literacy, improper
participate in crop insurance.
knowledge about crop insurance and premium were the
A positive but insignificant relationship had been
major constraints in the way of adoption of crop insu-
found between Limited Decision Power (LDP) and
rance market in Pakistan. However, these issues could
not willing to participate in crop insurance. Limited
be handled efficiently by coordination of government,
Decision Power (LDP) and coverage to limited
insurance agencies and media. Government should
perils were found to be insignificantly related with
make efforts to promote crop insurance under provision
dependent variable (NWTP), not willing to participate.
of subsidy. Electronic media could be utilized to
During our survey the main thing that we realized
disseminate the information regarding the functions/
was the hesitation of farmers to pay premium cost.
benefits of the crop insurance in the regional languages.
Premium Cost (PC) was the only independent varia-
Agricultural extension agents could also be a good
ble which had a massive impact on dependent varia-
source of not only creating awareness, among farmers
ble. Premium cost was positively and highly signi-
regarding crop insurance, but also to remove the disso-
ficantly related with not willing to participate in crop
nances about crop insurance in the minds of farmers.
insurance. Poverty was one of the reasons behind this attitude of the farmers towards premium cost.
References
Agriculture sector in Pakistan was dominated by
Abid Q S, Sahib H. 2009. Food insecurity in Pakistan. Sustainable
small farmers (less than 12.5 acres land holdings) and
Development Policy Institute, World Food Program and Swiss
almost 90% farmers were small (GOP, 2010). Large
Development Cooperation, Pakistan. pp. 103-104.
family size, dependence on single earning hand, high inflation rate, frequent natural hazards and income loss
Arif M, Khalid N. 2007. Agriculture and food security in Pakistan. South Asia Partnership, Pakistan. pp. 16-17.
and small farms were the reasons which usually forced
Asteriou D, Hall S G. 2007. Applied econometrics: a modern approach
the farmers to consider premium as an extra cost of
using eviews and microfit. Palgrave Macmillan, New York. pp.
production.
197-217.
Farmers believed that processes of getting in-
GOP. 2010. Agriculture statistics of Pakistan, Ministry of Food
surance, claiming losses and receiving compensation
Agriculture: Islamabad, Pakistan. http://www.pbs.gov.pk/content/
were time consuming. Especially, the provision of
agriculture-statistics-pakistan-2010-11.
services for loss assessment and the delivery of the compensation (payment) would not be done in
GOP. 2013. Pakistan economic survey 2012–2013. http://www.finance. gov.pk/survey_1213.html.
an efficient way and they might not be able to get
Iqbal M M. 2013. Climate change impacts on agriculture and building
compensation in time of need. Moreover, poor farmers
resilience in Pakistan. Workshop on developing farming system for
also believed that rich farmers would be served
climate change mitigation, Colombo Sri Lanka. http://www.adbi.org/
quickly and poor farmers would be ignored. That was
files/2013.08.29.cpp.sess7.7.country.ppr.pakistan.pdf.
why the variable "time taking process" was found to have a positive and significant influence on our
&NBJMYVFCBPFOHMJTI!OFBVFEVDO
TFCC. 2010. Task force on climate change. http://www.pc.gov.pk/ usefull%20links/Taskforces/TFCC%20Final%20Report.pdf.
June 2015Vol. 22No. 292-96 Journal of Northeast Agricultural University (English Edition)
Available online at www.sciencedirect.com
Factors Hindering Pakistani Farmers' Choices Towards Adoption of Crop Insurance Sidra Ghazanfar1, Zhang Qi-wen1*, Muhammad Abdullah1, Jaleel Ahmed2, Imran Khan3, and Zeeshan Ahmad1 1
College of Economics and Management, Northeast Agricultural University, Harbin 150030, China
2
School of Management, Harbin Institute of Technology, Harbin 150001, China
3
Department of Management Sciences, Harbin Institute of Technology, Harbin 150001, China
Abstract: This study was conducted to analyze the factors that negatively influence Pakistani farmers' willingness to participate in crop insurance. Probit model was applied to identify the significant factors which influenced our dependent variable "not willing to participate". The results of the analyses showed that crop insurance premium was the most influencing factor which had positive and significant impact on dependent variable. Similarly dissatisfaction with crop loan insurance scheme, lacking of knowledge about crop insurance, believing of being against Islamic rules and time taking process was also found to be positive and significantly influenced the dependent variable. While limited decision power and limited perils were not found to be significant in the results. Key words: crop insurance, willingness to participate, Probit model, Premium CLC number: F310
Document code: A
Article ID: 1006-8104(2015)-02-0092-05
districts, 74 are food deficit, in terms of net availability
Introduction
(Abid and Sahib, 2009). Water-stressed condition had increased the condition of food insecurity by reducing
Pakistan is a highly climate sensitive agriculture
the agriculture productivity in arid and semi-arid areas
dependent country where development and growth
of Pakistan (Iqbal, 2013).
of the economy depend on the agriculture sector, as
Hence, the analyses of the situation demand an
agriculture contributes about 21.4% to Gross Domestic
efficient crop insurance market in agriculture system
Product (GDP) and engages about 45% of labor in
which provides the security to agriculture production
agriculture sector (GOP, 2013). Situation of climate
and farmers' income. Although crop insurance market
uncertainty in Pakistan is getting worse and worse day
exists to protect farmers from these disasters, farmers
by day. Pakistan is exposed to a number of natural
seem to be not interested in participating in crop
disasters, including cyclones, floods, drought, intense
insurance. Most farmers in Pakistan, either ignored
rainfall, and earthquakes (TFCC, 2010). Almost one-
or overweighted low probability risks which showed
third of the households is living below the "food
that farmers were more sensitive about their current
poverty line" and the quantity of the food available
outcomes rather than future income risks. There were
to them is not enough to meet their nutritional
several factors for lowing crop insurance market
requirements (Arif and Khalid, 2007) and out of 120
penetration and lowing interest of farmers towards
Received 11 December 2014 Sidra Ghazanfar (1986-), female, researcher, Ph. D, engaged in the research of crop insurance in Pakistan. E-mail: [email protected] * Corresponding author. Zhang Qi-wen, professor, supervisor of Ph. D student, engaged in the research of financial theory and policy. E-mail: [email protected] &NBJMYVFCBPFOHMJTI!OFBVFEVDO
·93·
Sidra Ghazanfar et al. Factors Hindering Pakistani Farmers' Choices Towards Adoption of Crop Insurance
crop insurance, so the purpose of this study was to
schemes. We had used not willing to participate
investigate the factors that negatively influenced, the
(NWTP) as our dependent variable. As not willing
farmers' willingness to participate for crop insurance
to participate was a qualitative dummy dependent
programs.
variable, hence, we could not use Classical Linear Regression Model (CLRM). To avoid the problem
Materials and Methods
of linear probability model of having value beyond the range of zero and one, we could use the Logit and
We had collected the data from Punjab Province of
Probit models. As, these models solved the problems
Pakistan, three districts of Punjab were chosen to
of non-normality of the residuals, heteroskedasticity
conduct the study, namely Dera Gazi Khan, Rajan
and a smaller R-square. Logit and Probit models
Pur, and Bahawalpur. These districts were purposely
produced almost the same results for large samples.
chosen, as they were highly vulnerable to disasters
In this research paper, we had used Probit model,
of flood and drought. From each district, two tehsils
because Asteriou and Hall (2007) had mentioned that
were selected randomly to conduct the survey, among
Probit model was more sophisticated than that of Logit
the farmers of these tehsils. A total of 300 farmers
model. For the present study, the Probit model was
were selected by selecting randomly 50 farmers from
specified as the following:
each selected tehsil. Before they were asked to fill
NWTPi=β0+β1AIRi+β2DISi+β3INAi+β4KISi+β5LDPi+
the questionnaire, a briefing was given to farmers
β6LPi+β7PCi+β8TTPi+β9Agei+εi
about crop insurance scheme, just to make farmers
Where,
familiar with the mechanism and benefits of the crop
NWTPi=Not Willing to Participate was a dummy va-
insurance program. A questionnaire was developed to
riable that was measured as 1 for not willing to parti-
collect the required data regarding the demographics
cipate and 0 otherwise.
of the farmers, their willingness to participate for a
AIRi=Believe of being Against Islamic Rules. It
hypothetical crop insurance program and the factors
was measured as 1 for those who had mentioned it as
that influenced their decision of the participation.
against the Islamic rules and 0 otherwise.
Overall, 300 farmers were asked whether they were
DISi=Dissatisfaction of the farmers was a dummy
willing to participate in the given crop insurance
variable. 1 for dissatisfied farmers and 0 otherwise.
scheme. Out of which 184 farmers responded that
INAi=Inaccessibility was a dichotomous dummy
they were willing to participate in crop insurance
variable that was 1 for those farmers who had not
and 116 farmers replied that they were not willing
access to insurance schemes otherwise 0.
to participate. Those farmers, who refused to partici-
KIS i=Knowledge about Insurance Schemes was
pate in the hypothetical crop insurance plan, were
a dichotomous dummy variable that was 1 for those
asked regarding the factors that influenced their
farmers who had knowledge about insurance schemes
decision of "not willing to participate" for the designed
otherwise 0.
hypothetical crop insurance scheme. This research was
LDPi=Limited Decision Power was also a dummy
an attempt to explore those factors, among the farmers
variable.
in Pakistan.
LPi=Limited Perils was a dummy variable. PCi=Premium Cost was a dummy variable. 1 for
Probit model
those farmers who didn't want to involve/participate
In this research, we had tried to find out the key factors
in insurance schemes due to the high premium 0
which were associated with the decision of farmers
otherwise.
who were not willing to participate in crop insurance
TTPi=Time Taking Process was a dummy variable. 1 IUUQQVCMJTIOFBVFEVDO
·94·
Journal of Northeast Agricultural University (English Edition)
Vol. 22ǂNo. 2ǂ2015
for those farmers which had the opinion that insurance
70 years, with an average age of 43 years. Education
schemes had time taking processes 0 otherwise.
level was found to be low among our sample as the
Agei=Age of a farmer.
average number of educational years was found to
εi=An error term.
be eight years. Household size always remained a massive variable to measure in agricultural research. The household distribution of our sample ranged from
Results
two to nine family members, with an average size of Descriptive statistics
five members in a family. Farm income was calculated
In our study analysis, the age distribution scale of our
in Pakistani Rupees and average farm income was
selected sample ranged from minimum 22 to maximum
found to be 193 793.9 (Table 1).
Table 1 Descriptive statistics
Item
Mean
Median
Max
Min
Std. dev
Age
43.098
42.000
70.0000
23.0000
11.7670
Credit
0.1043
0.0000
1.0000
0.0000
0.3066
Education
7.7307
8.0000
14.0000
0.0000
2.7389
Non-farm income
0.1648
0.0000
1.0000
0.0000
0.3720
Crop diversity
0.2417
0.0000
1.0000
0.0000
0.4293
Farm income
193 793.9
178 192.0
690 000.0
47 301.00
95 570.30
Expected yield
0.1208
0.0000
1.0000
0.0000
0.3268
Land holding
7.8571
7.0000
20.000
3.0000
3.1114
Land tenure system
1.1978
1.0000
3.0000
1.0000
0.4130
Land holding distribution ranged from 2-20 acres
one of the major reasons, which the farmers mentioned
for sample, with an average size of 7.8 acres of
during our survey was to consider insurance schemes
land. About 40% of respondents had 1-5 acres of
against the Islamic jurisprudence. Almost 45% of the
land, 47.6% of farmers had 6-10 acres of land, 6.8%
farmers replied that these insurance schemes were not
of responding famers had 11-15 acres and 5.6%
according to Islamic laws. Another important reason
of farmers had more than 15 acres of land. Most
was the price of the crop insurance, and 60% of the
responding farmers of sample were small farmers,
farmers considered that their participation in crop
because about 90% of farmers in Pakistan were small
insurance would result an increases in their total cost
farmers (GOP, 2010). And 23.6% of farmers had non-
of the production. Limited power to make decision
farm income sources, while the remaining farmers did
was also found to be a major influencing factor as in
not earn non-farm income.
Pakistan families were usually large and combine family
The analysis showed that although majority of
system was common, so decisions were made under
farmers about 61.34% were willing to participate in
the consultancy of other family members. Decisions
crop insurance, but there still existed enough percentage
are made by seeking coordination from the other
of farmers, about 38.66% who were not willing to
family members who were usually senior in age and
participate, which was not a neglect able percentage of
experience, so the consent of other family members
the farmers that should be ignored. There could be a lot
was usually required to make decisions. Similarly,
of reasons for not to participate in insurance schemes,
lacking of proper information about the crop insurance
&NBJMYVFCBPFOHMJTI!OFBVFEVDO
·95·
Sidra Ghazanfar et al. Factors Hindering Pakistani Farmers' Choices Towards Adoption of Crop Insurance
mechanism and benefits and time taking process were
in crop insurance. The frequency distribution of these
found to be important reasons behind not participating
factors is shown in Table 2.
Table 2 Frequency distribution
Variable
No. of observation
Yes
No
Percentage (Yes) (%)
Not willing to participate
300
116
184
38.6667
Against islamic rule
300
136
164
45.3333
Dissatisfaction
300
63
237
21.0000
Lacking of knowledge about insurance scheme
300
138
162
46.0000
Limited decision power
300
154
146
51.3333
Limited peril
300
103
197
34.3333
Premium cost
300
180
120
60.0000
Time taking process
300
163
137
54.3333
Table 3 Results of Probit model
Variable
Coefficient
Standard error
z-statistic
Probability
Constant Against islamic rule Dissatisfaction Lacking of knowledge about insurance scheme Limited decision power Limited perils Premium cost Time taking process McFadden R-square N
2.3762 0.3740 0.3646 0.5280 0.1011 –0.2360 0.9884 0.2791 0.2202 300
0.3921 0.1741 0.2054 0.1675 0.1731 0.1748 0.1805 0.1668
6.0602 2.1479 1.7746 3.1508 0.5841 –1.3493 5.4752 1.6728
0.0000 0.0317 0.0760 0.0016 0.5591 0.1772 0.0000 0.0944
Table 3 represented the results of the estimated Probit
their farms got insured, under this crop loan insurance
model which was applied to analyze the influence of
scheme. Therefore, dissatisfaction with crop loan
above mentioned factors on farmers' decision of "not
insurance scheme was also found to be positively and
willing to participate" (NWTP) in crop insurance.
significantly related to not willing to participate in
Almost 98% population of Pakistan was Muslim. In
crop insurance.
the religion of Islam, the interest was strictly forbidden, so most of the farmers do not believe in conventional
Discussion
banking as well as in insurance schemes. We had found that our first independent variable "Against
Lacking of proper knowledge about crop insurance
Islamic Rule (AIR)" was positively and significantly
concepts, its features and benefits were found to be
related to our dependent variable "NWTP". This could
one of the important factors that negatively influenced
also be one of the reasons behind dissatisfaction of
farmers' willingness to participate in crop insurance
farmers with currently running crop loan insurance
program. Farmers perceived it was difficult to under-
scheme. Crop loan insurance scheme was a mandatory
stand about the procedures, policies and risk manage-
program, all the farmers whether they were interested
ment mechanism of crop insurance. Low literacy
or not, if avail agriculture credit loan from banks,
rate among farmers was one of the reasons that IUUQQVCMJTIOFBVFEVDO
·96·
Journal of Northeast Agricultural University (English Edition)
made it was difficult for farmers to understand the
Vol. 22ǂNo. 2ǂ2015
dependent variable "not willing to pay".
concept of formal risk management measures, such as crop insurance schemes that was why lacking of
Conclusions
Knowledge about Insurance Schemes (KIS) was also positively and significantly related with not willing to
The analyses revealed that low literacy, improper
participate in crop insurance.
knowledge about crop insurance and premium were the
A positive but insignificant relationship had been
major constraints in the way of adoption of crop insu-
found between Limited Decision Power (LDP) and
rance market in Pakistan. However, these issues could
not willing to participate in crop insurance. Limited
be handled efficiently by coordination of government,
Decision Power (LDP) and coverage to limited
insurance agencies and media. Government should
perils were found to be insignificantly related with
make efforts to promote crop insurance under provision
dependent variable (NWTP), not willing to participate.
of subsidy. Electronic media could be utilized to
During our survey the main thing that we realized
disseminate the information regarding the functions/
was the hesitation of farmers to pay premium cost.
benefits of the crop insurance in the regional languages.
Premium Cost (PC) was the only independent varia-
Agricultural extension agents could also be a good
ble which had a massive impact on dependent varia-
source of not only creating awareness, among farmers
ble. Premium cost was positively and highly signi-
regarding crop insurance, but also to remove the disso-
ficantly related with not willing to participate in crop
nances about crop insurance in the minds of farmers.
insurance. Poverty was one of the reasons behind this attitude of the farmers towards premium cost.
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