Many lenders are extremely wary of extending credit to farmers, fearful that they will inherit the risks inherent to farming.  In the Eastern Region where Mumuadu Rural Bank (MRB) operates, an estimated 70% of households make a living in the agricultural sector, but agricultural loans make up only 2% of the bank’s loan portfolio.

IPA and MRB developed an agricultural loan product with an insurance component that partially indemnifies farmers against low crop prices. The goal is to reduce farmers’ risk in investing in agriculture inputs and thus encourage them to make investments in the first place.

This pilot study will determine whether receiving the crop price indemnity loan led to changes in investment behavior.  A short follow-up survey with farmers will lelp us learn whether the crop price insurance enabled farmers to take on riskier but more profitable investments.