Enabling productive but asset-poor farmers to succeed : A risk financing framework
AbstractThis paper examines how market-based risk financing instruments could enable asset-poor but productive farmers exposed to production shocks to engage in riskier but higher-return agricultural activities. The financing of these exogenous shocks is addressed in a conceptual framework based on an optimal allocation of capital where the farm is viewed as a business unit. The approach allows for (1) testing the business viability of a specified crop by assessing the minimum business capital required to ensure the continuity of the business after the occurrence of an adverse production shock; and (2) designing an optimal risk financing program to finance the minimum capital requirements using a combination of instruments (insurance, savings, and borrowing). The authors provide numerical and graphical examples to illustrate the relevance of this financial approach to the specific issues of agricultural risk management.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 3211.
Date of creation: 01 Feb 2004
Date of revision:
Insurance&Risk Mitigation; Payment Systems&Infrastructure; Environmental Economics&Policies; Banks&Banking Reform; Labor Policies; Banks&Banking Reform; Environmental Economics&Policies; Insurance&Risk Mitigation; Economic Theory&Research; Crops&Crop Management Systems;
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