Managing risk is therefore important not only for smoothing out the well-being of these farmers over the good and the bad years, but also for enabling their escape from extreme poverty. If the risks facing poor farm households can be reduced, their creditworthiness can be increased. And increased creditworthiness permits them to invest in higher-yield activities, including higher value-added farming. For these reasons and others, including a probable rise in the volatility of climate shocks accompanying human-induced climate change, financial risk management is likely to come to the forefront of strategies for poverty reduction.
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