Perceptions and management of risk by commercial farmers in Eritrea.
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Date
2004
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Abstract
A survey of 186 commercial farmers from three Zobas (provinces) of Eritrea was
conducted between November 2002 and February 2003 to examine farmers' perceptions
of risk, to determine the most important sources of risk affecting farmers' decisions, to
identify managerial responses to risks and to identify information use. As part of the main
survey, 74 randomly selected commercial dairy farmers were also interviewed to identify
factors that affect the purchase of livestock insurance.
Findings show that whilst some risks are of concern to most farmers, others are more
enterprise or region specific. In general, changes in weather, changes in the labour force,
and diseases, pests and weeds were identified as being important sources of risk for most
farmers. Factor analysis was used to analyse heterogeneity amongst farmers' perceptions
of various risks. Results indicate that programmes designed to assist farmers in Eritrea to
manage production and price risks should vary between enterprises and between regions.
Policy implications of this research include that the government of Eritrea should
disseminate information to clarify agricultural tax and land policies, and its
demobilization and rehabilitation programmes. Relaxing foreign exchange rate controls
may reduce price risks in agricultural input markets.
Increased use of information sources, choice of production system, keeping production
records, and diversification of farm enterprises were found to be the main production
responses to risk. Important marketing responses included indirect selling (e.g. to the
grain board or wholesalers) and use of marketing information, while important financial
responses were keeping financial records and investing off-farm. Factor analysis was
used to analyse heterogeneity amongst farmers' managerial responses to risk. Results
indicate that farmers respond differently to different types of risk attributed to enterprise
type. Policy implications of this research include that the government of Eritrea should
create a more conducive environment for business, train farmers with appropriate record
keeping skills and improve road and communication infrastructure.
Results also show that farmers' sources of information vary according to farm type.
While poultry and dairy farmers depend largely on information provided by the
government, horticulture and crop farmers rely mostly on their own sources of
information or non-governmental sources. Policy recommendations include additional
and appropriate record-keeping training for farmers, improving the road and
communication infrastructure, promoting commercial information providers, and
periodically publishing an agricultural magazine by the Ministry of Agriculture in a way
that farmers can understand the information.
The results of a logit model of the adoption of livestock insurance indicate that formal
education of the farmer and the farmer's awareness of livestock insurance increase the
probability of insurance adoption, whereas farming experience, poor location and use of
alternative risk management strategies, such as off-farm investments and farm enterprise
diversification, reduce the probability of livestock insurance adoption. Further insight
into the socioeconomic factors influencing farmers' adoption of livestock insurance may
assist policy makers and the National Insurance Corporation of Eritrea in their future
plans. Results of this study have some policy implications, such as the need for a variable
rather than fixed insurance premium, improving the know-how of farmers concerning
risk assessment, improving Zobas' infrastructure and a need for a thorough study to be
conducted on the demand for agricultural insurance in Eritrea.
Description
Thesis (M.Sc.Agric.)-University of KwaZulu-Natal, Pietermaritzburg, 2004.
Keywords
Farm management--Eritrea., Farmers--Eritrea., Risk management--Eritrea--Decision making., Agriculture--Economic aspects--Eritrea., Livestock insurance--Eritrea., Agricultural insurance--Eritrea., Agricultural produce--Eritrea--Marketing., Farm management--Eritrea--Decision making., Risk assessment--Eritrea., Theses--Agricultural economics.