International Journal of Agriculture and Technology
Open AccessAnalysis of Khat Farmers’ Perception on Agricultural Insurance and Risk Attitude: A Case Study of Meru County, Kenya
Authors: Muraya DL, Gichuru RW
Abstract
Individuals' evaluations of innovations may differ from those of experts due to a lack of knowledge or erroneous impressions. Most people consider their perceptions to be appropriate. The potential influence of the perception of risk management instruments on the choice to utilize them has rarely been explored. Individual risks can be categorized as either risk averse, risk neutral or risk loving. A farmer's risk attitude affects how they handle uncertainty, especially in situations like farming where outcomes are unpredictable. Risk-averse farmers are more likely to seek insurance than risk-loving or risk-neutral farmers. An increase in risk aversion is associated with an increase in insurance use. This study aimed at determining the perception of khat farmers’ on agricultural insurance and their risk attitude. The data used in this study was obtained from khat farmers in Meru County, Kenya, from a sample of 323 farmers. The study employed the principal Component Analysis model to determine their perception and Risk attitude. Empirical results suggest that khat farmers perceive agricultural insurance as inevitable and needful. Further, the results also indicate that insuring companies can be trusted and a full compensation on losses suffered. Khat farmers love to explore investment opportunities for their finances and prefer high returns for their investment even though there are risks. The results suggest that khat farmers are risk loving. The study recommends insurance program that offers full compensation to khat farmers in case a loss is suffered. The study further recommends strengthening on awareness on the importance of agricultural insurance to enhance khat farmers’ perception on agricultural insurance scheme.
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