From risk to resilience: Increasing insurance uptake among farmers in rural Uganda, by Aisha Nanyiti
For VoxDEV
The majority of households in rural Uganda are involved in agriculture but have no insurance against crop failure or price shocks. Evidence suggests that awareness programmes that help farmers understand potential negative outcomes—perhaps through simulations or testimonials from peers who have experienced losses—could increase formal insurance uptake.Poor households in low-income countries face numerous risks, from extreme weather events to illness and crop failure. With limited savings and assets, even small shocks can have devastating consequences on welfare. While formal insurance products can potentially help mitigate these risks, their uptake remains remarkably low among rural smallholder farmers, who instead primarily rely on informal risk-sharing networks. This pattern persists despite evidence suggesting that informal insurance mechanisms provide incomplete coverage against shocks. These shocks translate into shortfalls in income and consumption (Karlan et al. 2014, Morduch 1999).
In Nanyiti and Pamuk (2025), we focus on smallholder farmers in rural Uganda and examine how different insurance arrangements affect their economic behaviour and decision-making. Uganda provides an ideal setting to explore these questions, as only 1% of adults have formal insurance coverage, despite 67% of households depending on agriculture for their livelihoods. By comparing behaviour under formal insurance (provided by registered companies) versus informal insurance (peer-to-peer transfers), we gain insights into why formal insurance uptake remains low and how farmers respond to different risk management options.
Using a real effort task experiment, we investigate whether the incentives created by these different insurance arrangements influence productivity and risk management decisions. Our findings reveal important behavioural responses that help explain observed patterns in insurance uptake and suggest potential approaches for improving the design and adoption of formal insurance products. We find that farmers exerted less effort under informal insurance but not under formal insurance coverage, and increased their level of formal insurance coverage after experiencing a bad outcome.
Read the full article on VoxDEV.
ABOUT THE AUTHOR
Aisha Nanyiti is a Lecturer in the Department of Policy and Development Economics at the School of Economics of Makerere University Uganda. Aisha has a PhD in Development Economics from Wageningen University, The Netherlands. Aisha has expertise in impact evaluation, including Randomized Control Trails (RCTs) and Lab-in-the-Field experiments and in causal inference with Survey designs.
