Smallholder farmers’ risk perceptions and risk management responses

Abstract

Purpose The purpose of this paper is to identify the perceptions of farmers on the major sources of risk and to examine the effectiveness of the risk management responses of rural smallholder farm households in the semi-arid region of Northern Ghana from the socioeconomic perspective. Design/methodology/approach Both descriptive statistics and exploratory factor analysis were used on a Likert scale question to rank and identify the important risk perceptions and management strategies of the farmers. The linear regression model was used to highlight the significant factors that affect the farmers’ risk perception and management responses. Findings The effects of the variations in crop yield, fertiliser prices and crop price on household income were perceived as the three most relevant sources of risk. Stabilising household income by growing different crops, storing feed/seed reserves and spreading sales were the most effective risk management strategies. Factor analysis identified market risk, production risk and human risk as major risk factors whereas diversification, financial strategy, and off-farm employment were perceived as the most effective risk management strategies. Farm and farmer characteristics were found to be significantly associated with risk perceptions and risk management strategies. Risk perceptions significantly increase the risk management strategy adopted by the smallholder rural farmers. Practical implications The findings of the paper call for the integration of farmers’ risk perceptions and management strategies in the development of agricultural policies for the semi-arid regions of Ghana. Originality/value This paper deviates from the traditional technology adoption studies by modelling rural household perceptions and management strategies using, using descriptive, factor analyses, and linear regression.