Differential impacts of informal mutual versus informal individual saving mechanisms on food insecurity in Kenya: Is risk preference a factor?

Abstract

Informal mutual and informal individual saving mechanisms have the potential to facilitate consumption smoothing thereby abridging transitory food insecurity and concomitantly household employment of negative consumption coping strategies. Notwithstanding, the potency of Informal mutual and informal individual saving mechanisms in alleviating transitory food insecurity, individual holding of such saving mechanisms is likely to be influenced by their preference of risk among other factors. This study examined the interplay of preference for risk, Informal mutual and informal individual saving mechanisms and food security on the basis of publicly available data from the 2021 Kenya FinAccess survey. We employ the propensity score matching approach to estimate the effects of preference for risk on the household propensity to hold either informal mutual or, informal individual saving mechanisms and the impact thereof on food security. Our study offers three major findings. First, a preference for risk increases the probability of holding informal mutual saving mechanisms but is not relevant in the holding of informal individual saving mechanisms. Second, we find that informal savings increase household food security. Finally, informal mutual saving mechanisms are more efficient in increasing household food security than informal individual saving mechanisms.