Development of an Actuarially Fair Crop Insurance Model for Paddy Fields in Hambantota and Ampara Districts
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Date
2011
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Publisher
Uva Wellassa University of Srilanka
Abstract
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Sri Lanka, like most of the countries in the Asian region has an agricultural economy and plays a huge role in the nation's economy and social development. Rice is the dominant food in Sri Lankan society for thousands of years, according to many historical sources. That was identified by all the governments came into power after 1948 and has implemented various programs to develop the rice production in the country.
At present rice has become the staple food of the 19 million people in Sri Lanka and its contribution to the Gross Domestic Product (GDP) is approximately 18%. It is the livelihood of more than 1.8 million farmers and more than 30% of the total labor force is directly or indirectly involved in the paddy field sector.
Agro-Climatically, the year is divided into two seasons coinciding with the monsoons as "Maha" and "Yala" and rice lands are cultivated in these two seasons. But annual losses in paddy field sector is huge in Sri Lanka due to unexpected bad weather, adverse prices of paddy, damages from insects and other various diseases. If the farmers come across with huge losses, they are helpless and always looking for a financial assistant from an external party.
All over the world, the use of Crop Insurance as a risk management tool has grown rapidly in recent years (Munich Re, 2009). In most countries, this kind of insurance policy was introduced almost four decades ago. But Sri Lanka, even though we have a great agriculture history, still been seeking for a proper insurance program to fulfill poor farmers by financing them if they incurred a loss in their paddy production. This research is based on development of a Group Crop Insurance Model for paddy field sector in Hambantota and Ampara districts by using farm visited data gathered in the month of June, 2011.The samples were not randomly selected according few limitations. Our budget was not satisfactory to conduct a huge survey by assigning reasonable number of human resources. The other main problem we came across was the limited available time. However, two samples with sample sizes of fifty were selected from each districts such that Damana division in Ampara and Tissamaharama division in Hambantota.
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Keywords
Agriculture, Entrepreneurial Agriculture, Financial Management