The investment decisions of small-scale farmers in developing countries are conditioned by
their financial environment. Binding credit market constraints and incomplete insurance can
limit investment in activities with high expected profits. We conducted several experiments in
northern Ghana in which farmers were randomly assigned to receive cash grants, grants of
or opportunities to purchase rainfall index insurance, or a combination of the two. Demand
for index insurance is strong, and insurance leads to significantly larger agricultural …

The investment decisions of smallscale farmers in developing countries are conditioned by
their financial environment. Binding credit market constraints and incomplete insurance can
reduce investment in activities with high expected profits. We conducted several
experiments in northern Ghana in which farmers were randomly assigned to receive cash
grants, grants of or opportunities to purchase rainfall index insurance, or a combination of
the two. Demand for index insurance is strong, and insurance leads to significantly larger …