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Risk Management Among Agricultural Households And The Role Of Off-Farm Investments In Uasin Gishu County, Kenya

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  • Korir, Luke Kipkurgat

Abstract

Farmers face many risks which arise from natural, economic and socio-political environments. Risk sharing institutions like national insurance and credit schemes that help reduce the burden of risk to society are weak in Uasin Gishu county. Private sector insurance products are still in their developing stages and this has prompted farmers to turn to self insurance strategies that include diversification and social mechanisms for coping with risk. Off-farm investment is one of the diversification strategies whose prevalence and effectiveness in risk management have not been evaluated. This study sought to determine risk attitudes of farmers, to identify the determinants of off-farm investments and to investigate the effectiveness of off-farm investments in risk management. Data was collected from 100 randomly selected farm households. The ELCE method was used and exponential utility functions fitted by the method of nonlinear least squares and used to estimate the coefficients of absolute risk aversion. A logit model was used to identify determinants of off-farm investments. Effectiveness of off-farm investments in risk management was assessed by simulating the effect of replacing the weight of off-farm income with that of farm income on the coefficient of variation of total income. Results indicated that the major risks of concern to farmers were drought, market/price, pests and diseases and institutional risks with prevalence rates of 59, 34, 4 and 3% respectively. All the farmers in the study were risk averse. Years of experience in farming, employment income, gender and farm income significantly determined off-farm investment decisions. Simulation results showed that off-farm investment income reduces risk. Government policies and institutional mechanisms that reduce risk (such as crop insurance and irrigation technologies) and those that facilitate farmers‟ access to assets like off-farm investments in order to manage risks in farming are required.

Suggested Citation

  • Korir, Luke Kipkurgat, 2011. "Risk Management Among Agricultural Households And The Role Of Off-Farm Investments In Uasin Gishu County, Kenya," Research Theses 117806, Collaborative Masters Program in Agricultural and Applied Economics.
    • Handle: RePEc:ags:cmpart:117806
    DOI: 10.22004/ag.econ.117806
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    References listed on IDEAS

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    Cited by:

    1. Mbonane, Nobuhle Duduzile, 2018. "An analysis of farmers’ preferences for crop insurance: a case of maize farmers in Swaziland," Research Theses 334771, Collaborative Masters Program in Agricultural and Applied Economics.
    2. Muhammad Amjed Iqbal & Azhar Abbas & Syed Asif Ali Naqvi & Muhammad Rizwan & Abdus Samie & Umar Ijaz Ahmed, 2020. "Drivers of Farm Households’ Perceived Risk Sources and Factors Affecting Uptake of Mitigation Strategies in Punjab Pakistan: Implications for Sustainable Agriculture," Sustainability, MDPI, vol. 12(23), pages 1-17, November.
    3. Ajah, Agom E & Ofem, UI & Effa, EB & Ubabuko, LI, 2022. "Analysis of risk management practices among cassava farmers in Ideato south local government area, Imo State, Nigeria," African Journal of Food, Agriculture, Nutrition and Development (AJFAND), African Journal of Food, Agriculture, Nutrition and Development (AJFAND), vol. 22(03).
    4. Jayanti Mala Nayak & A V Manjunatha, 2019. "Risk sources and management strategies of farmers: Evidence from mahanadi river basin of Odisha in India," Working Papers 436, Institute for Social and Economic Change, Bangalore.
    5. Waithira, Waweru Caroline, 2017. "An Analysis Of Risk Attitudes And Risk Management Strategies Among Dairy Farmers In Murang’A County, Kenya," Research Theses 276428, Collaborative Masters Program in Agricultural and Applied Economics.
    6. Waweru, Caroline Waithira & Nyikal, Rose & Busienei, John R, "undated". "An Analysis Of Risk Attitudes And Risk Management Strategies Among Dairy Farmers In Murang’A County, Kenya," Dissertations and Theses 271063, University of Nairobi, Department of Agricultural Economics.
    7. Olila, Dennis & Nyikal, Rose & Otieno, David, 2015. "What Do Farmers Want from Crop Insurance Schemes: A Stated Preference Approach," 2015 Conference, August 9-14, 2015, Milan, Italy 212596, International Association of Agricultural Economists.

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