Subsistence versus Cash Crop Weather Index Insurance. A Willingness to Pay Study for Maize and Bean Crops in Mafeteng, Maseru and Berea Districts

Abstract

The paper analysed the potential of weather index insurance as one of the strategies for managing climate variability in Lesotho through a Double Bounded Dichotomous Choice Contingent Valuation Method with an open ended follow up question to elicit farmers’ willingness to pay. The study went further to compare willingness to pay for weather index insurance between a cash crop (Bean) and a subsistence crop (Maize). Bivariate probit model was used in the analysis. Based on data collected from 400 farmers, the results showed that majority of farmers are willing to insure their crops; maize (94.75%) and bean (92.5%) against weather perils and pay a monthly premium of M96.72 ($7.28) for maize and M101.31 ($7.63) for beans. This implies that farmers in the lowlands of Lesotho regard weather index insurance as one of the strategies for managing climate variability. The results of the t-test showed statistical significance (p<0.1) between maize and bean mean willingness to pay. Thus, policy and program intervention designed to address the climate variability problem in the study area should consider these preferences in the insurance product.

Keywords: Willingness to pay, weather index insurance, maize, beans