Liquidity constraints, informal institutions, and the adoption of weather insurance: A randomized controlled Trial in Ethiopia

Belissa, Temesgen Keno; Bulte, Erwin; Cecchi, Francesco; Gang, Ira N.; Lensink, Robert

doi:10.1016/j.jdeveco.2019.06.006

Cited by 56 publications

(50 citation statements)

References 31 publications

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“…For example, insured loans coupled with income insurance such that farmers (banks) can use (give) part of the payout for consumption smoothing can protect the most vulnerable farmers from defaulting in case of a drought and may boost credit demand (Farrin and Miranda 2015; Gallenstein et al 2020). Alternatively, a contract that delays premium payments until after harvest can ease liquidity constraints and encourage demand (Belissa et al 2018). Likewise, demand for meso‐insured loans may increase if banks respond to insurance by lowering interest rates, a result predicted by Farrin and Miranda (2015) and Carter, Cheng, and Sarris (2016).…”

Section: Limitationsmentioning

confidence: 99%

Insured Loans and Credit Access: Evidence from a Randomized Field Experiment in Northern Ghana

Mishra¹,

Gallenstein²,

Miranda³

et al. 2020

American J Agri Economics

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We conducted a two‐treatment randomized control trial in northern Ghana to investigate how bundling index insurance with agricultural loans affects smallholder access to credit. In one treatment, farmer groups were invited to apply for production loans bundled with an index insurance contract that, in the event of a drought, indemnifies farmers directly (micro‐insured loans). In the second treatment, farmer groups were invited to apply for production loans bundled with an index insurance contract that, in the event of a drought, indemnifies the lender on the condition that the indemnity be used to retire the farmer's debt obligation (meso‐insured loans). Farmer groups in the control category were invited to apply for uninsured loans. We find that insured loans increase farmers' likelihood of receiving credit by between 15 and 21 percentage points. Exploring the mechanisms of this effect, we find no impact on the likelihood that farmers apply for credit but do find an increase in the likelihood of loan approvals of between 17 and 25 percentage points.

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Section: Limitationsmentioning

confidence: 99%

Insured Loans and Credit Access: Evidence from a Randomized Field Experiment in Northern Ghana

Mishra¹,

Gallenstein²,

Miranda³

et al. 2020

American J Agri Economics

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show abstract

“…In Casaburi and Willis (2018), contract farming made it possible for the insurer to finance the premium and then deduct it from payouts to farmers at the end of the season. Belissa et al (2019) find that delayed premium payment without any contract farming agreement increases demand substantially, although default rates are relatively high putting into question the financial viability of this approach. Farmers in our study were involved in contract farming, but we did not offer insurance through their contract farming arrangements, and they were required to pay premiums before planting and not at harvest.…”

Section: Resultsmentioning

confidence: 99%

Can Experiential Games and Improved Risk Coverage Raise Demand for Index Insurance? Evidence from Kenya

Janzen¹,

Magnan²,

Mullally³

et al. 2020

American J Agri Economics

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Uninsured risk impedes agricultural production, but traditional indemnity insurance is not a viable option for smallholder farmers due to market failures. Weather index insurance is often touted as an alternative risk management tool. Demand for weather index insurance, however, has been weak. One possible reason is basis risk, the mismatch between index insurance payouts and individual outcomes. We estimate the impact of two interventions on preferred coverage under a real index insurance product, as revealed through an auction: (a) a reduction in basis risk, and (b) an experiential game that teaches farmers how index insurance works, with an emphasis on basis risk. We show all farmers demonstrate strong sensitivity to basis risk. The experiential game modestly increased knowledge, and experiential game participants indicate higher levels of preferred insurance coverage. Although offering a lower basis risk insurance product and playing an experiential game both increase preferred coverage in isolation, there is no additional impact of doing both. We adapt a theoretical model of misattribution bias to demonstrate how reference-dependent learning with loss aversion could lead to this unexpected result.

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“…Formal insurance also provides imperfect coverage (or no coverage at all) because it is expensive and because the timing of insurance premiums typically occurs when households are liquidity‐constrained (Belissa, Bulte, Lensink, Gangopadhyay, & Cecchi, 2019). Many index insurance products also suffer from basis risk.…”

Section: Introductionmentioning

confidence: 99%

Empowerment and intimate partner violence: Domestic abuse when household income is uncertain

Bulte

Lensink

2020

Review Development Economics

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Intimate partner violence is an important global health problem that remains ill understood. Several studies have documented that female empowerment may increase violence against women—the so‐called “male backlash.” We propose a utilitarian explanation for this phenomenon, based on the assumption that violence may be used as an instrument to affect the distribution of the household surplus between the spouses. Our main result is that promoting norms of gender equity (or otherwise enhancing the prospects of divorced women) may inadvertently promote violence against women in settings where production outcomes are uncertain.

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Liquidity constraints, informal institutions, and the adoption of weather insurance: A randomized controlled Trial in Ethiopia

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Cited by 56 publications

References 31 publications

Insured Loans and Credit Access: Evidence from a Randomized Field Experiment in Northern Ghana

Insured Loans and Credit Access: Evidence from a Randomized Field Experiment in Northern Ghana

Can Experiential Games and Improved Risk Coverage Raise Demand for Index Insurance? Evidence from Kenya

Empowerment and intimate partner violence: Domestic abuse when household income is uncertain

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