Sustainability in Index-Based Weather Insurance The Lessons from the small scale Tea Planters in Southern Province

Abstract

Weather risk is an inherent in agriculture. Crops may be destroyed by drought or over rain. In many cases, farmers also confront the risk of natural catastrophe. Assets and lives may be lost due to severe droughts, hurricanes, earthquakes and floods. The type and severity of the risks confronting farmers are particularly burdensome to small-scale farmers. IndexBased Weather Insurance (WI) products for agriculture represent an attractive alternative for managing catastrophic weather risk that confront by small-scale planters in Sri Lanka. This paper presents the main lessons from WI programs implemented in Southern province for the small-scale tea planters (STPs), and examines the prospects for the extension and the scaling up of index-based weather insurance products to mitigate the risks in small-scale tea plantation. Data was obtained through Focus Group Discussions conducted in Galle and Matara districts. A personal interview survey was also conducted with STPs. A total of 176 (GL n=61; MT n=115) usable responses were obtained on five-point Likert scale ranging from “Strongly Disagree” (1) to “Strongly Agree” (5). A number of quantitative methods, including correlation analysis and ANOVA were applied to analyze the data using the SPSS statistical software. The main findings show that the majority of STPs are satisfied with the existing WI (mean 4.2, SD=.9044). Yet differences were found to exist between STPs of Galle and Matara in the importance that respondents attach to the different aspects of WI (Wilks Lambda = 0.548, p = <0.001).