Agricultural Microinsurance for Sri Lanka Exploring the Feasibility of Farmers‟ Organizations as a Stakeholder for Insurance Delivery

Abstract

The main objective of this study is to explore the feasibility of farmers‟organizations as a vehicle for microinsurance delivery for paddy crop cultivated bysmall-scale farmers in Sri Lanka to protect against risk of production loss caused bynatural disasters. Principal Components Analysis, a form of factor analysis is used toelicit the capacity of farmers‟ organizations as a stakeholder of the insurance supplychain using household level data from Ampara District in Sri Lanka. The results showthat the farmers‟ organization is most widespread and very close institutional setup forpaddy farmers. Farmers‟ organizations are capable of handling financial activities withtransparency, and have healthy financial habits and those farmers participate actively infarmers‟ organization activities. This study provided clear policy insights into the designof institutions channel that foster cooperation, and of the characteristics of farmers‟organizations. To assist in the farmer organization‟s financial activities, the postalnetwork can act as financial intermediaries in circumstances where the microinsurers donot have an outlet or branch networks in their target area. For developing the linkagesbetween farmers and microinsurers, the public-private partnership model can be usedfor microinsurance supply to paddy farmers in Sri Lanka. In this context, multistakeholderpartnerships should be made imperative for paddy farmers‟ insurancedelivery aimed at widespread coverage or large-scale implementation.

Key words: Farmers‟ organizations, Financial intermediaries, Insurance delivery,Microinsurance