1 Can weather index drought insurance benefit to Least Developed Countries ' farmers? A case study on Burkina Faso

By using a detailed agricultural and climate dataset over Burkina-Faso and very simple assumptions regarding the form of an insurance contract, we investigate the potential feasibility and interest for farmers of a weather-index insurance system in this country. To do so, we explore the results of more than 3.000 simulated contracts applied to 30 districts, 21 years (1984-2004) and 5 crops (cotton, millet, sorghum, maize and groundnut). We find that such an insurance system, even based on a simple weather index like cumulative rainfall during the rainy season, can present a significant economic efficiency. The determinants of the efficiency of such contracts are the correlation between the weather index and yields and the year-to-year variability of the yield. As a consequence of these two determinants, the farmer’s gain from an insurance contract is higher in the driest part of the country. In the same way, maize and groundnuts are the most suitable to implement an insurance system since their respective yields show a large variance and a generally high correlation with the weather index. We also explore some limits of such insurance contracts. The spatial scale appears to be ke