Behavioural Factors Influencing Low-Income Farmers Purchase Decisions of Weather Index Insurance

Abstract

Weather index insurance is an emerging insurance solution in developing countries aimed at assisting low-income farmers cope with weather-related shocks, especially drought. Despite its many benefits which include income stabilization effects, financial inclusion and increased agricultural intensification, the product suffers from low uptake in emerging markets where it is available. The objective of this paper is to identify behavioural factors, based on the Theory of Planned behaviour (TPB) as the guiding framework, that influence low-income farmers purchase decisions of weather index insurance in attempts to uncover patterns that drive demand. Deploying quantitative research involving structured questionnaires, the study sampled 326 low-income maize farmers in Free State, North West and Mpumalanga provinces of South Africa. The findings revealed that while attitude and subjective norms have a direct effect on purchase decisions, perceived behavioural control had a non-significant association. The study advances the understanding of the low-income agricultural insurance market and assists in framing future weather index insurance products by understanding drivers of demand from a behavioural perspective.

Keywords: Weather index insurance, low-income farmers, theory of planned behaviour, South Africa