RISK MITIGATION AND COPING STRATEGIES | 59 • Sale of assets, mainly liestocƒ ˆfter nonfarm employment, using livestoc as uasi-liuid assets that can be converted into liuid assets to compensate for crop losses or cope with unexpected shocs such as medical emergencies is an important ris management tool Stocpiling basic assets, therefore, is the corresponding ris-prevention method, and temporary surpluses are usually “invested” in assets that can be easily liuidated, such as small live- stoc (eg, goats, pigs, chicens) Œhe limitations of this strategy stem from the mortality¤loss rates associated with livestoc, the price disadvantage associated with emergency sales, and asset indivisibility (ie, the need to sell the entire pig even if handling the emergency would call for only half of the pig’s value) ¦ther uasi-liuid assets suitable for stocpiling are building materials (eg, brics, gravel), firewood, and manure ¦ver the period of data collection in the Smallholder ‰iaries, sales of any ind of livestoc to gener- ate cash or cope with shocs were reported by ”” percent of sample house- holds in Œan—ania, and •‘ percent of sample households in aistan, but not at all among the sample in –o—ambiue FINANCIAL RISK MANAGEMENT TOOLS ©sing financial tools such as savings, credit, and insurance products in con„unc- tion with traditional methods of ris management is arguably a more compre- hensive and preferred overall strategy for those farmers with access to those services Œhe literature on agricultural insurance begins with an assessment of farmer demand for insurance ˆ critical uestion in this assessment is whether ris-management methods used by farmers adeuately protect household con- sumption stability and maintain farm productive capacity €f the answer is yes, then there is limited scope for public policies such as crop insurance to help Ÿ“ farmers ad„ust to ris (™aler and Žodha …ž¡¢) • Saings and insurance oor households hesitate to commit their limited cash-flow surpluses to insurance premium payments for the coverage of rel- atively low-impact or unliely riss (ie, with low expected losses) Œhey pre- fer to eep those funds in liuid or uasi-liuid assets that have multiple uses Œhe low uptae of nonlife insurance in low-income countries is usually Ÿ” attributed to this preference Œhe Smallholder ‰iaries reported no use of insurance, of any ind, across the samples in –o—ambiue, Œan—ania, and aistan over the entire period of data collection • ”rop and liestocƒ insurance ˆ separate topic with its own abundant litera- ture, crop insurance, including index-based insurance, has a mixed record in low-income countries Œhis is in no small measure due to the tendency of governments to intervene in the presence of systemic shocs, such as droughts, floods, or pests, and totally or partially relieve farmers of all obliga- tions (interest and principal) with regard to their creditors Œhe incentives for farmers to purchase insurance are therefore minimal, and more successful efforts to extend insurance rely on bundling the insurance with the purchase of seeds or fertili—er Œhe case for financial institutions to purchase index- based insurance has been convincingly made by –iranda (‘’’ž), since their nonperforming loans would drastically and almost immediately increase in Ÿ¢ the event of systemic weather-based shocs
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