| dc.description.abstract | We review agricultural financing strategies in developed and developing economies
in light of the risks that agricultural businesses face due to variations in weather
conditions among other challenges. We specifically review Kenyan farmers’ agricultural
risk management strategies and credit products that are offered by banks, insurance
companies and other organizations, that are intended to minimize the negative
impacts of agricultural risks. We discuss the application of index-based agricultural
insurance and credit products in Kenya. We analyze reasons for low uptake of the
product and propose an innovative credit-insurance model that can effectively link
the small scale farmers to two potentially important players, commercial banks and
the Kenyan government. Our model aims at persuading the commercial banks that
there is more business to tap in the agribusiness credit for small scale farmers with
reduced exposure to the risk of default. Also, it is aimed at convincing the government
of the effectiveness of extending agricultural development funds to groups of farmers
through commercial banks that have experience in managing credit. The structured
model will increase the uptake of index-based insurance and agricultural credit and
therefore enhance agricultural production hence Kenya’s food security. We show that
banks who lend to farmers with index linked insurance products are likely to face low
credit risks. Furthermore, we design a product to transfer some of the weather-related
risks to the financial market. | en_US |
