Determinants of Adoption of Paddy Crop Insurance Schemes: Empirical Evidence from Chitwan and Bardiya Districts of Nepal

Abstract

Paddy is an important crop from an economic and food security perspective in Nepal. Despite its importance, the adoption of the paddy crop insurance policy remains low. The study districts were purposively selected on the basis of official data from the Department of Agriculture, Nepal, as the highest insured of paddy crop among all the districts in fiscal year 2021/22. This study investigates the key factors affecting the uptake of the paddy crop insurance scheme using survey data from the Chitwan and Bardiya districts of Nepal. The survey comprised a total of 460 randomly selected farmers, representing equal numbers from each of the insured and non-insured categories. A semi-structured interview schedule was used to collect primary data due to differences in farmers' literacy levels and knowledge of insurance terminologies, and to obtain precise responses. SPPS and Stata software were used for data analysis. The logistic regression results showed that farmers’ knowledge of insurance (OR= 47.558, p < 0.001) significantly increased the likelihood of insurance adoption, where receiving information through institutional channels and trusted institutional networks is seen to be noticeably increasing the probability of adoption of paddy insurance schemes. In contrast, factors such as age (p = 0.926), gender (p = 0.625), ethnicity (p = 0.513), education (p = 0.069), and occupation (p = 0.571) were not statistically significant at the 0.05 level and therefore did not significantly influence the adoption of insurance. Enhancing farmers’ awareness programs and using trusted local communication channels can be effective in expanding paddy insurance uptake and strengthening resilience against farming risks.