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Article Title:
Valuation of Natural Insurance Demand for Non-Timber Forest Products in South Nandi, Kenya
by Sumukwo Joel, Adano Wario R., Kiptui Mark, Cheserek Grace J. and Kipkoech Anderson K.

Abstract:
Non-timber forest products (NTFPs) contribute significant economic benefits to rural households in developing countries. This paper examines the insurance value of the demand for NTFPs in South Nandi, Kenya. Some studies have described natural insurance role of forest products; however, substantial knowledge gaps exist on insurance valuation of forest goods and this paper intends to show that natural insurance is a normal economic good. To analyse the estimates of insurance demand for forest goods, a sample of 224 households were selected within a four km radius from South Nandi forest. A contingent market and multiple regression techniques were used to identify the determinants of the natural insurance values. Results reveal that majority (55%) of the respondents are willing to contribute extra money, above the normal maximum willingness to pay (WTP) amounts for improved forest products management, as guarantee for future availability of NTFPs. On average the option value of NTFPs is Sh. 2,538 per annum, indicating the insurance premium the residents are willing to pay for continued supply of NTFPs. The main factors that influence option demand for NTFPs are education and number of children per household head. The paper recommends that the poor be allocated with tradable pasture permits to cushion them in the face of income and consumption shocks. Forest protective policies that are too restrictive to forest access compromise its natural insurance provision and negatively impact on the welfare of economically vulnerable households. Hence, policy planners and decision makers should incorporate natural insurance policies in forest management.

Keywords: valuation, natural insurance, non-timber forest products, willingness to pay, option value

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