Investigating the Deployment of Takaful for Farmers in Flood and Drought-Prone Regions in Nigeria

Abstract

This study has investigated the deployment of takaful for farmers in flood- and drought-prone regions in Nigeria. The study used a quantitative research design with cross-sectional survey data from smallholder farmers in some climate-prone zones. The results of agricultural losses were modelled as a dependent variable, with participation in Takaful and farm and farmer characteristics as independent variables, using descriptive statistics, tests of means, and multiple regression. It was found that farmers with Takaful schemes experienced a much lower proportion of crop loss than those who were not insured. Regression estimates revealed that Takaful insurance minimised the severity of agricultural losses, holding constant farm size, farming experience, access to extension services, and the region’s climatic exposure. The results provided empirical evidence that Takaful insurance increased farmers’ ability to absorb climate shocks and stabilise their outcomes after disasters. The research found that Takaful insurance is a suitable risk management instrument for agricultural flood and drought losses in Nigeria. The policy initiatives to enhance climate resilience should thus incorporate agricultural Takaful within the broader adaptive and rural finance policies.