1. Weather index insurance, climate variability and change and adoption of improved production technology among smallholder farmers in Ghana Francis Hypolite Kemeze* * PhD Candidate in Applied Agricultural Economics and Policy, University of Ghana Meeting the food needs of developing countries’ growing population, chronic hunger, undesirable effects of climate change and increasingly urbanized population require increases in agricultural productivity. New understanding of plant genes may offer ways to increase crop yields to the levels required to adequately and sustainably feed the growing population in developing countries in the context of climate change. But in most developing countries farmers are very poor and highly vulnerable to natural disasters. They lack knowledge and finance to scope and adopt new improved technology. To face these challenges, weather index insurance could play a significant positive role. In many cases, the appropriate market for weather index insurance may not be individual households but instead local level risk aggregators such as microfinance institutions, farmers cooperatives, input suppliers, who indirectly face weather risk due to their interdependence with farmers exposed to such risk. The objective of this research is to investigate how optimal is the use of weather index insurance as a tool for managing farm’s loan risk, stimulating adoption of improved production technology (such as improved drought-tolerant seeds) and assuring smallholder farmers income in Ghana. Dynamic stochastic modelling will be used to establish the effect of weather index insurance in the farm loan portfolio, in the adoption of drought resistance technology and in the water management interventions. For the empirical part, we will conduct a randomized control trial, implemented in three distinct stages among 800 smallholder farmers over two agricultural seasons in Ghana. Abstract So for creating more values in terms of managing poor farmers out of the risk and increasing agricultural productivity, weather index insurance could work as a bridge among competent market, infrastructure, information, technological opportunities as we all as financial inclusion in an effective manner. The main objective of this research is to investigate how optimal is the use of weather index insurance as a tool for managing farm’s loan risk, stimulating adoption of improved production technology (such as drought-tolerant seeds, water intervention) and assuring smallholder farmers income in Ghana. This objective is subdivided into four researches questions as follow:  Can Credit-Linked Index Insurance helps individual farmers and rural lenders release the credit constraint and protect their livelihoods?  Can Linking Drought tolerance seed with weather index insurance reduce the fair premium and enhance smallholder farmer’s adoption to drought resistance seed?  How are investments in water management decisions affected when weather index insurance is available?  How does index insurance help farmers secure their income and be less vulnerable to extreme weather events? So for creating more values in terms of managing poor farmers out of the risk and increasing agricultural productivity, weather index insurance could work as a bridge among competent market, infrastructure, information, technological opportunities as we all as financial inclusion in an effective manner. The main objective of this research is to investigate how optimal is the use of weather index insurance as a tool for managing farm’s loan risk, stimulating adoption of improved production technology (such as drought-tolerant seeds, water intervention) and assuring smallholder farmers income in Ghana. This objective is subdivided into four researches questions as follow:  Can Credit-Linked Index Insurance helps individual farmers and rural lenders release the credit constraint and protect their livelihoods?  Can Linking Drought tolerance seed with weather index insurance reduce the fair premium and enhance smallholder farmer’s adoption to drought resistance seed?  How are investments in water management decisions affected when weather index insurance is available?  How does index insurance help farmers secure their income and be less vulnerable to extreme weather events? Research Objective and questions 1.In the next 30 years agricultural production will have to increase by 60% in Africa (FAO, 2013), Causes:  Growing population;  Increase in purchasing power;  Change in diet.  More people will be living in cities reduction of farm labor 2. Climate change will make it more difficult and more costly  Increase unpredictability of weather patterns;  Drought, flood;  Rainfall variability and perturbation  Pests and diseases; Thus, the increase in food production during the next years will have to be achieved using less labour, water, and cultivated land. Adoption of improve production technology (modern biotechnology, water management intervention, soil management capacity, etc.) could make extremely important contributions to future agricultural growth, food security, and poverty reduction. 3- Challenges faced by Smallholder farmers in developing countries : Lack of knowledge; Lack of Evidence based Policy; Limited assets; Lack of risk management skill; Low access to new technology & Financial services; 4- Policy makers, farmers, and consumers have difficulty accepting new technologies:  Investment required for new technology;  Aversion to risk;  Health hazard;  Changes required to traditional production practices; Weather index insurance could reduce some of these effects and enhance the adoption of improve technology. Basically weather index insurance is such a tool which helps to reduce risk of the production for the farmers from the climate shocks and climate change. Weather index insurance could play an important role for protecting the rural poor farmers. Especially when the strategy of implementing this insurance is integrates as well as market driven, it can easily support agricultural productivity. 1.In the next 30 years agricultural production will have to increase by 60% in Africa (FAO, 2013), Causes:  Growing population;  Increase in purchasing power;  Change in diet.  More people will be living in cities reduction of farm labor 2. Climate change will make it more difficult and more costly  Increase unpredictability of weather patterns;  Drought, flood;  Rainfall variability and perturbation  Pests and diseases; Thus, the increase in food production during the next years will have to be achieved using less labour, water, and cultivated land. Adoption of improve production technology (modern biotechnology, water management intervention, soil management capacity, etc.) could make extremely important contributions to future agricultural growth, food security, and poverty reduction. 3- Challenges faced by Smallholder farmers in developing countries : Lack of knowledge; Lack of Evidence based Policy; Limited assets; Lack of risk management skill; Low access to new technology & Financial services; 4- Policy makers, farmers, and consumers have difficulty accepting new technologies:  Investment required for new technology;  Aversion to risk;  Health hazard;  Changes required to traditional production practices; Weather index insurance could reduce some of these effects and enhance the adoption of improve technology. Basically weather index insurance is such a tool which helps to reduce risk of the production for the farmers from the climate shocks and climate change. Weather index insurance could play an important role for protecting the rural poor farmers. Especially when the strategy of implementing this insurance is integrates as well as market driven, it can easily support agricultural productivity. Background Dynamic stochastic modelling will be used to establish the effect of weather index insurance in the loan portfolio, in the adoption of water management interventions and in the adoption of drought resistance technology. For the empirical part, we will conduct a randomized control trial, implemented in three distinct stages among 800 smallholder farmers over two agricultural seasons in Ghana. Methodology of the research The relevance of this study is to enhance food security by improving agricultural technology transfer, mitigate the risk confronting small scale farmers who are reluctant to adopt potentially profitable new technologies and provide financial mechanisms to allow credit constrained farmers to adopt improved technology. For the empirical part, we will conduct a randomized control trial, implemented in three distinct stages among 800 smallholder farmers over two agricultural seasons in Ghana. Relevance of the research Adverse Crop Production Events, 1980-2011 Key: DR = Drought; BF = Bushfire; PD = Pests and Disease; CC = Civil Conflict; FL = Flood