Do Farmers Demand Innovative Financial Products? A Case Study in Cambodia

Abstract

This study examines Cambodian farmers’ demand for weather index insurance (WII), an innovative financial product, for managing climate change-related risks. Rice and cassava farmers in Battambang Province of Cambodia were interviewed to understand their preferences for WII. We applied a binary logistic model to quantify the factors that influence farmers’ WII demand. We discovered that farmers’ marital status and off-farm labor are crucial factors that impact the demand for WII. More importantly, we also investigated gender differences, considering the critical role of women in the agricultural sector and personality differences between men and women. Our findings indicated that for male respondents, being married and having an additional off-farm laborer increase the probability of demand for WII by 72.6% and 36.8%, respectively. For female respondents, the education level is the most significant factor in making purchase decisions. An additional year of education increases the probability of WII demand by 5.0%. Generally, our results are consistent with some prior studies but inconsistent with others. This suggests that further research is necessary to understand the barriers associated with WII schemes and how to overcome them. Regardless, our study provides valuable insights for various stakeholders in implementing WII schemes, including financial professionals, insurance companies, communities, and governments, for designing more flexible WII products, improving farmers’ financial literacy, and providing effective post-event support to enhance farmers’ resilience to climate change.