Drought remains a serious threat for food security across Sub-Saharan Africa because of the overdependence of rain-fed agriculture. Beyond that, it makes farming a risky venture, thereby hindering smallholder farmers’ access to credit required for the adoption of supplemental irrigation, insurance and other risk management strategies. Over the years, supplemental irrigation and index insurance has widely been advocated to manage risk associated with rain-fed agriculture. This has resulted in the establishment of a couple of irrigation facilities in Ghana and the promotion of individual small-scale irrigation farms and insurance products. However, the adoption of supplemental irrigation and insurance is considerably low in Ghana and across Africa.
In this regard, the Feed the Future Innovation Lab for Markets, Risk & Resilience in collaboration with the International Centre for Evaluation and Development is supporting a research team from the University of Energy and Natural Resources in Ghana to implement an ALL – IN Project to test an innovative bundle of supplemental irrigation and a drought index insurance product to expand farmers’ overall drought protection. This innovation could unlock investments that leverage the benefits of irrigation and better-managed risk, further improving long-term agricultural growth and resilience in rural communities.
Due to the risky nature of agricultural production, Professor John Kuwornu, the Principal Investigator, and his team under this research project recently concluded a study involving 477 rice farmers operating under the Vea and Tono Irrigation Schemes in the Upper East Region of Ghana. The study investigated how farmers perceive risk and the adoption of risk management instruments among irrigated rice farmers in the Upper East Region of Ghana.
Findings of this study brought fourth interesting evidence and insights: First, the results showed that the perception index score was considerably high. This implies that the farmers perceive that various types of risks including production, marketing and financial risks affect their farming activities. The study found that farmers use multiple risk management techniques concurrently to manage risk. This includes the adoption of improved rice varieties, use of synthetic agrochemicals, participation in off-farm work, practising crop rotation, diversification and participation in contract farming. Interestingly, the study revealed that although all the farmers are utilising supplemental irrigation via the Tono and Via irrigation schemes, none of them had any form of agricultural insurance.
Second, using a multivariate probit regression approach, the study revealed that farmers’ socio-demographic, farm-level, institutional, risk perceptions and environmental factors have a significant and heterogeneous effect on the adoption of risk management instruments and the intensity of adoption. Particularly, gender, years of education, total farm size, rice farm size and soil fertility status significantly predict the adoption of crop diversification as a risk management instrument. In other words, male farmers with large farm sizes are able to practice crop diversification, whereas those with large rice farm size, more years of education and observe decline in their soil fertility status are unlikely to practice crop diversification.
The study found that gender, years of education, farm size, rainfall prediction and soil fertility status influence the adoption of off-farm work as a risk management instrument. The findings also revealed that the practice of crop rotation as a risk management instrument is influenced by gender, farming experience, access to extension services, the land tenure system, total farm size, market risk perception, and soil fertility status. Thus, males with more experience in farming, who had access to extension agents, owned their farmlands, and perceived that the agricultural market is risky are more likely to practice crop rotation, whiles those who observed a decline in the fertility of their soil are unlikely to practice the same. Further, farmers who have access to agricultural extension influence their participation in contract farming as a risk management instrument.
To help address the challenge, the researchers offer certain recommendations including the need for insurance companies to develop strategies to ensure the uptake of the insurance policies by farmers within the irrigation scheme. Moreover, investment in extension services, research centres, and irrigation facilities is critical, as this may persuade the farmers to use the risk management tools. Further, stakeholders should consider farmers’ risk perceptions when designing risk management instruments.
The ALL-IN project is being implemented by Feed the Future Innovation Lab for Markets, Risk & Resilience in collaboration with the International Centre for Evaluation and Development. The project is supporting 12 research projects to test financial and market innovations that take the most promising agricultural tools for families in Africa from the lab to the field.