Analysis of Risk Management Strategies among Potato (Solanum Tuberosum) Smallholder Farmers in Njombe Town Council, Tanzania

Abstract

Despite the potential contribution of potato farming to household income and financial resilience among smallholder farmers in Tanzania, the enterprise is typically a risky business. The main risks are associated with production and marketing processes. These risks ultimately reduce potato revenue and limit the optimal profitability of the enterprise. Consequently, potato SHFs may experience welfare problems. This study aimed at contributing towards improved SHFs’ income and financial resilience through the use risk management strategies. This is achieved through analyzing the effects of the selected production and market risks on potato farming enterprises and determining the effects of risk management strategies attributes on potato enterprise performance. Furthermore, crop-revenue insurance products and collaborative-based revenue insurance scheme (CoBRIS) contracts for SHFs were designed. A multi-stage sampling technique was employed to obtain 384 potato SHFs. A census was employed to collect data from 8 micro-insurance companies. A semi-structured questionnaire, key informant interview and desktop review were also used to collect data. Descriptive statistics, Content analysis, PACE analysis, multiple linear regression and Conditional Logit Model for data analysis were employed. This study shows that price volatility (72.6%) and bacterial wilt (67.6%) are risks that are likely to affect potato farming enterprises. Majority (66.1%) of potato SHFs perceived price volatility as the most risk that has a very high effect on potato farming enterprises. Every 1% increase in frequency use significantly improved potato enterprise performance by 0.667%. The existing crop-revenue insurance products were described in company-product characteristics, distribution channels and the target markets. MGen insurance company had the highest score (3.94 out of 5) in the aspect of product, access, cost and experience. Crop-revenue insurance companies collaborated with banks, inputs suppliers, off-takers and mobile phone service providers in offering insurance services. Furthermore, 85% of SHFs were willing to participate in the CoBRIS. Coverage level, indemnity, and trust-related factors positively affected potato SHFs’ WTP for CoBRIS contracts, while premium amount had a negative effect. The study recommends policies that aim at establishing platforms such as M-Kilimo to improve market information. SHFs to increase the frequency use of risk management strategies to improve potato enterprise performance significantly. The current crop-revenue insurance business model is to be adapted and extended to potato SHFs. Facilitation of potato SHFs into membership groups is also recommended, as this builds more trust among SHFs and increases the probability of becoming more WTP for the CoBRIS contracts.