Land Ownership and Catastrophic Risk Management in Agriculture: The Case of Khyber Pakhtunkhwa Province of Pakistan

The agricultural sector faces numerous threats arising mainly due to adverse weather conditions. These climatic risks are usually beyond the control of farmers and are mostly uncertain. Managing these risks and uncertainties is crucial in an effort to alleviate poverty and ensure food security for the masses who depend on farm sector for their livelihoods. Land tenure agreements along with other socioeconomic factors play an important role in farmers’ decisions to adopt risk coping tools. This study is aimed at investigating the effect of tenure agreements on farmers’ decisions to adopt three risk coping tools, namely off-farm diversification, precautionary savings and credit reserves, to mitigate climatic risks in Khyber Pakhtunkhwa Province of Pakistan. The results revealed that the adoption of traditional risk coping tools is relatively higher among landless tenants when compared with owner-cum-tenant farmers and owner farmers. However, for formal risk coping tools (credit reserves) tenant farmers have significantly lower access when compared with owner farmers. Owner farmers, on the other hand, can access financial institutions to lessen their burden of risks. The findings of the logit models also indicated the significant role of land ownership status, along with perceptions of risk sources and attitude towards risk, on farmers’ decisions of adopting off-farm diversification and credit reserves. Therefore, it is suggested that financial institutions should facilitate tenant farmers’ access to credit facilities by simplifying and shortening the credit sanction procedure.