Institutional Factors and Crop Farmer's Participation in Agricultural Insurance Scheme: Evidence from South Western Nigeria

Abstract—The paper investigated the effect of institutional factors on crop farmer’s participation in agricultural insurance schemes in South Western, Nigeria.  Specifically, the study described the socio-economic characteristics of crop farmers in the study area, examined the level of awareness of the crop farmers, analyzed the factors influencing the participation of crop farmers and intensity of use of the agricultural insurance policy and compare the income between the participating and non-participating crop farmers in the study area. Multistage sampling techniques were used to select 240 respondents in the study area. Primary data were used for the study, which was sourced from a cross-sectional survey of crop farmers in the study area with the aid of a well-structured questionnaire. The data were analyzed using descriptive, Cragg’s (double-hurdle) model, and t-test. The result of the descriptive analysis showed that the mean age of participant and non-participant was 49.47 (±16.36) and 48.19(±15.41) respectively, where the mean years of formal education for participants and non-participant were 10.23(±5.46) and 10.54(±5.72) respectively. The result of Cragg’s model in the first hurdle (Probit model) showed that variables such as education, access to credit, farm size, membership of association, and awareness significantly influence the decision of crop farmers to participate in agricultural insurance scheme. In the second hurdle (truncated regression), access to credit, income, risk assessment, and contact with extension was significant to intensity of participation in agricultural insurance scheme in the study area. The result of the t-test showed that there is a significant difference in the income of participants and those that do not participate in agricultural insurances scheme in the study area. Even though a considerable proportion of respondents sampled were aware of agricultural insurance, there is still a need to increase awareness among the farmers so that more farmers can participate in the scheme in other to stabilize their income.