Financial Innovation among Smallholder Farmers: Enhancing the uptake of Weather Index Insurance through a Pragmatic Approach

Abstract

Advances in innovation around financial instruments over the decades have promoted a response to the improved development of agriculture products and services in the sector, allowing, to some lesser extent, the introduction and testing of these products to poor rural farmers. However, over the years, the agriculture sector has faced challenges from climate change, resulting in poor agriculture production and productivity for farmers. Therefore, the study considered the extent to which smallholder farmers were willing to uptake and adopt innovations such as the weather insurance index and financial edging technology. The uptake of innovation and technologies has several factors. According to Rodgers, the technology diffusion theory, five elements need to be considered: compatibility, relative advantage, complexity, observability, and trialability. To achieve this objective, we conducted a mixed-method study targeting 252 smallholder farmers in the Choma district of the Southern province of Zambia. Using well-structured questionnaires, a survey of 252 randomly but purposively selected farmers were interviewed. The study was a cross-section from 2014 to 2020 to help establish the impact throughout the years. An IBM statistical analysis in social science (SPSS) was used to analyze quantitative data, and thematic analysis was used to analyze qualitative data. The study established that the extent of innovation diffusion of the weather insurance index with farmers is a combination of factors that need to be implemented if farmers adapt and adopt technologies. The innovation diffusion theory explains the factors that are supposed to be paid attention to as financial innovations are pushed onto the agricultural markets. However, the study found that 34.9% of farmers were unaware of the weather insurance index provision through government initiatives or not. This research, therefore, informs national policymakers, farmers, researchers, and educators on the impact of the weather insurance index. It similarly provides evidence on the uptake as it is and suggests a way forward on issues such as "best practices for marketing, distribution, insurance education, and product design to some extent."