Enabling Productive but Asset-Poor Farmers to Succeed : A Risk Financing Framework
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World Bank, Washington, D.C.
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This paper examines how market-based
risk financing instruments could enable asset-poor but
productive farmers exposed to production shocks to engage in
riskier but higher-return agricultural activities. The
financing of these exogenous shocks is addressed in a
conceptual framework based on an optimal allocation of
capital where the farm is viewed as a business unit. The
approach allows for (1) testing the business viability of a
specified crop by assessing the minimum business capital
required to ensure the continuity of the business after the
occurrence of an adverse production shock; and (2) designing
an optimal risk financing program to finance the minimum
capital requirements using a combination of instruments
(insurance, savings, and borrowing). The authors provide
numerical and graphical examples to illustrate the relevance
of this financial approach to the specific issues of
agricultural risk management.
Palabras clave
RISK MANAGEMENT, AGRICULTURAL INSURANCE, FARM INCOME, CROP INSURANCE, FINANCIAL INSTRUMENTS, AGRICULTURAL ECONOMICS, AGRICULTURAL MANAGEMENT, POVERTY, FARMERS, FOOD & AGRICULTURE ORGANISATION ACTUARIAL SCIENCE, ADVERSE SELECTION, AGRICULTURAL ACTIVITIES, AGRICULTURAL BUSINESS, AGRICULTURAL INSURANCE, AGRICULTURAL PRODUCTION, AGRICULTURE, ANALYTICAL APPROACH, AVERAGE YIELDS, BANANAS, CAPITAL MARKETS, CAPITAL REQUIREMENTS, CATASTROPHE COVERAGE, CATASTROPHES, CATASTROPHIC RISKS, CDF, COCOA, COMMODITY, CONCEPTUAL FRAMEWORK, CONTRACTUAL SAVINGS, COVERAGE, CREDIT, CROP, CROP INSURANCE, CROP ROTATION, CROP YIELD, CROP YIELDS, CROPS, DEBT, DEFORESTATION, DISASTERS, ECONOMIC CONSEQUENCES, EXCHANGE RATES, EXPECTED RETURN, FAO, FARM, FARM INCOME, FARMER, FARMING, FARMS, FEASIBILITY STUDIES, FERTILIZERS, FINANCIAL PERFORMANCE, FINANCIAL RISK, FINANCIAL SECTOR, FINANCIAL STRUCTURE, GOVERNMENT INTERVENTION, GOVERNMENT SUBSIDIES, HERBICIDES, INCOME, INSURABILITY, INSURANCE, INSURANCE, INSURANCE COMPANIES, INSURANCE MARKETS, INSURANCE PREMIUMS, INSURANCE PRODUCTS, INSURERS, INTEREST RATE, INTEREST RATES, LIQUID ASSETS, LIQUIDITY, MARGINAL PRODUCTIVITY, MARKET RISK, MORAL HAZARD, OPERATING LOSSES, POLLUTION, POOR FARMERS, PRICE RISK, PRODUCERS, PRODUCTION COSTS, PRODUCTIVITY, PROFIT MARGIN, PROFITABILITY, PROGRAMS, REINSURANCE, RESERVES, RISK MANAGEMENT, RISK MANAGEMENT POLICIES, RISK TRANSFER, SAVINGS, SOCIAL SAFETY NETS, SYSTEMIC RISK, TRANSACTION COSTS, VALUE ADDED, WEALTH