Enabling Productive but Asset-Poor Farmers to Succeed : A Risk Financing Framework
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 a...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, D.C.
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2004/02/3916582/enabling-productive-asset-poor-farmers-succeed-risk-financing-framework http://hdl.handle.net/10986/14743 |
| Summary: | 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. |
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