This paper examines how agricultural investment decisions in northern Ghana are influenced by credit and risk constraints. The study randomly assigned farmers to receive cash grants, rainfall index insurance, or both, and found that index insurance significantly increased agricultural investment and riskier production choices. The key constraint to investment was uninsured risk, as farmers could access resources to increase expenditure on their farms when provided with insurance against catastrophic risks. Demand for insurance was strongly influenced by farmers' own and their social network's insurance payouts, and was consistent with the presence of basis risk and imperfect trust in insurance payouts. The study also found that capital grants had relatively small effects on investment, while insurance had a more significant impact. The results suggest that underinvestment in agriculture is often due to uninsured risk, and that index insurance can help farmers make more informed investment decisions. The paper also highlights the importance of social interactions in insurance demand, as farmers' trust in insurance payouts is influenced by their experiences with the product. The findings have implications for agricultural policy and the design of insurance products in developing countries.This paper examines how agricultural investment decisions in northern Ghana are influenced by credit and risk constraints. The study randomly assigned farmers to receive cash grants, rainfall index insurance, or both, and found that index insurance significantly increased agricultural investment and riskier production choices. The key constraint to investment was uninsured risk, as farmers could access resources to increase expenditure on their farms when provided with insurance against catastrophic risks. Demand for insurance was strongly influenced by farmers' own and their social network's insurance payouts, and was consistent with the presence of basis risk and imperfect trust in insurance payouts. The study also found that capital grants had relatively small effects on investment, while insurance had a more significant impact. The results suggest that underinvestment in agriculture is often due to uninsured risk, and that index insurance can help farmers make more informed investment decisions. The paper also highlights the importance of social interactions in insurance demand, as farmers' trust in insurance payouts is influenced by their experiences with the product. The findings have implications for agricultural policy and the design of insurance products in developing countries.