Insurance Research to Benefit Ghanaian Farmers

Farmers in the West African nation of Ghana may someday be able to purchase crop insurance because of research conducted by a team of professors and students at Illinois State University.

The research will be used to help develop small scale insurance programs in Ghana that will cover farmers' losses due to droughts or floods.

So-called microinsurance programs are a relatively new concept in developing nations, but are important tools for covering agricultural losses and helping to break ongoing cycles of poverty in rural areas, according to James Jones, director of Illinois State's Katie School of Insurance and Financial Services. 

Jones, along with a multidisciplinary team of faculty members and graduate students, is compiling data on weather patterns and crop yields in agricultural regions of Ghana.  That information will be used to design an insurance product that will fit the needs of family farmers.  That product could then be adopted by insurance companies in Ghana and implemented on a local level.  Crop loss payments would be made based on the data showing the correlation between rainfall amounts and crop yields.  The product would provide a payout to farmers if there was too much or too little rain during the growing season. 

Crop loss payments from a microinsurance programs are often quite small by American standards - perhaps only a few hundred dollars - but can prevent catastrophic financial hardship for farmers in countries like Ghana.  Such small scale insurance programs, along with programs that provide loans to farmers and individual entrepreneurs, are part of a growing trend in the developing world.  By helping to make farmers and business people more financially secure, nations can begin to move away from heavy reliance on foreign aid payments.

During a recent trip to Ghana, two members of  the research team met with local bankers, insurers, academics , government officials and cultural leaders and found strong interest in the microinsurance product and obtained informal agreements from them  to participate in product development and a pilot project.

The insurance project faculty team members include Horace Melton, Marketing, Aslihan Spaulding, Agriculture, Krzysztof M. Ostaszewski, Actuarial Program, and three Actuarial Program graduate students.  Faculty members from the University of Ghana are also contributing to the project which is funded by a grant from the International Labour Organisation in Zurich, Switzerland.