Crop Price Indemnified Loans for Farmers: A Pilot Experiment in Rural Ghana

Dean Karlan*, Ed Kutsoati, Margaret McMillan, Chris Udry

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

41 Scopus citations

Abstract

Farmers face a particular set of risks that complicate the decision to borrow. We use a randomized experiment to investigate (1) the role of crop-price risk in reducing demand for credit among farmers and (2) how risk mitigation changes farmers' investment decisions. In Ghana, we offer farmers loans with an indemnity component that forgives 50 percent of the loan if crop prices drop below a threshold price. A control group is offered a standard loan product at the same interest rate. Loan uptake is high among all farmers and the indemnity component has little impact on uptake or other outcomes of interest.

Original languageEnglish (US)
Pages (from-to)37-55
Number of pages19
JournalJournal of Risk and Insurance
Volume78
Issue number1
DOIs
StatePublished - Mar 2011

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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