The impact of index‐insured loans on credit market participation and risk‐taking

Gallenstein, Richard; Flatnes, Jon Einar; Dougherty, John P.; Sam, Abdoul G.; Mishra, Khushbu

doi:10.1111/agec.12611

Cited by 16 publications

(6 citation statements)

References 53 publications

(75 reference statements)

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“…Our result that fertilizer adoption increases when farmers have access to loans bundled with micro-insurance complements numerous empirical field studies that have found a positive impact of stand-alone index insurance on technology adoption decisions (Cai et al, 2015;Elabed & Carter, 2015;Jensen & Barrett, 2017;Karlan et al, 2014;Miranda & Farrin, 2012). Our results are also consistent with theoretical research that predicts that index insurance would be effective at promoting smallholder adoption of advanced technologies when bundled with agricultural production loans (Carter et al, 2016;Dougherty et al, 2021;Farrin & Miranda, 2015;Gallenstein et al, 2021;Miranda & Gonzalez-Vega, 2011). However, our results are sparse with respect to the wide range of inputs we explore.…”

Section: Introductionsupporting

confidence: 89%

Does bundling credit with index insurance boost agricultural technology adoption? Evidence from Ghana

Mishra,

Gallenstein,

Sam

et al. 2023

Agricultural Economics

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The adoption of advanced agricultural technologies in Sub‐Saharan Africa remains disappointingly low, particularly among the millions of poor smallholders who account for most of the agricultural production. We conducted a randomized control trial in Ghana to assess the impact of easing drought‐risk constraints in the agricultural credit market, by bundling joint liability agricultural loans with index insurance, on smallholder farmers’ agricultural technology adoption decisions. In the micro‐insurance treatment, any index insurance payouts go directly to farmers, while in the meso‐insurance treatment, payouts are issued to banks to be used to expunge farmers’ debts. We find evidence that bundling joint liability lending with micro‐insurance increases adoption of fertilizer.

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Section: Introductionsupporting

confidence: 89%

Does bundling credit with index insurance boost agricultural technology adoption? Evidence from Ghana

Mishra,

Gallenstein,

Sam

et al. 2023

Agricultural Economics

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“…Evidence on the interest in insured loans which let the lender take a first claim on the indemnities has been mixed so far. By means of simulation (Farrin & Miranda, 2015) and experimental evidence (Galarza & Carter, 2011; Gallenstein et al., 2020) different studies confirmed that coupling loans and insurance would increase the demand for credit as there is no risk of losing the collateral. Mishra et al.…”

Section: Experimental Design and Implementationmentioning

confidence: 97%

Digital opportunities for the distribution of index‐based microinsurance: Evidence from a discrete choice experiment in Mali

Kirchner,

Musshoff

2024

J Agricultural Economics

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Index‐based microinsurance is a promising risk management tool for smallholder farmers. Recently, several mobile‐delivered insurance schemes have entered the market. Depending on the degree of digitisation of the product, farmers can learn about the insurance, register, pay premiums and receive payouts via a mobile phone. As cell phone usage and network coverage constantly increase, digitally enabled insurance distribution may overcome previous barriers for insurance adoption. Still, farmers' preferences for these products remain largely unknown. We address this knowledge gap by means of a discrete choice experiment applied to 499 maize farmers in Mali. The experiment presents an easy‐to‐understand multi‐peril crop insurance linked to a greenness index. It focuses on attributes related to the distribution channel and product design. Using mixed logit models, we find that the insurance attributes enabled by mobile‐delivery are attractive to farmers. Product bundles that include mobile‐delivered weather information and agricultural advice in addition to the insurance policy or credit access increase the likelihood of farmers taking out insurance. Similarly, recommendations from fellow farmers increase interest in the insurance product. The results are highly relevant for future product improvements that are needed to increase adoption rates and ultimately realise the loss‐hedging potential of microinsurance.

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“…Based on kinship support, the informal risk-taking network can improve the ability of farmers to resist external shocks by increasing their current income, promoting private lending, and expanding employment opportunities [23,71]. Families with weak economic vulnerability and more considerable informal risk-taking network resources are more likely to choose income diversification to maintain the smooth consumption level of families [72,73] and reduce the incidence of poverty. According to Mobarak and Rosenzweig [74], informal risk-taking networks can indirectly reduce economic vulnerability by improving the ability to access information, funds, emotional support and enhance the ability of families to resist adverse shocks.…”

Section: Hypothesis 3 (H3)mentioning

confidence: 99%

Does External Shock Influence Farmer’s Adoption of Modern Irrigation Technology?—A Case of Gansu Province, China

Tan

Sarkar

Rahman

et al. 2021

Land

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Due to the severe irrigational water scarcity and ever-growing contamination of existing water resources, the potential of improved and innovative irrigation technology has emerged. The risk-taking network may play an essential role in the adoption of modern irrigation technology (MIT). The main goals of the current study were to find the impacts of external shocks on MIT adoption by farmers. For doing so, the study analyzed the mediating effect of economic vulnerability (EV) and the moderating effect of the risk-taking network on farmer’s adaptation of MIT. Economic vulnerability of farmers refers to risks caused by external shocks to the farming system which may affect the farmer’s adoption of MIT. The empirical set-up of the study consists of micro survey data of 509 farmers from the Gansu Province of China. The results show that the external shock has a significant negative impact on adapting MIT by rural farmers. At the same time, EV plays an intermediary effect in increasing the impact of external irrigation on the adaptation of MIT. The intermediary to total effect is 36.57%. The risk-taking network has a moderate effect on the relationship between external shocks, affecting farmers to adopt MIT, while external shocks also increase EV which affects farmers’ adopting MIT. Thus, it can be said that the risk-taking network regulates the direct path of external shocks affecting farmers’ choice to adapt to MIT, and external shocks also affect farmer’s MIT adaptation. The public and private partnerships should be strengthened to facilitate risk minimization. Government should provide subsidies, and financial organizations should also formulate more accessible loans and risk-sharing facilities. The government should expand the support for formal and informal risk-taking network. They should also extend their support for formal and informal risk-taking networks to improve the risk response-ability of vulnerable farmers. The concerned authorities should attach smallholder farmers’ socio-economic structure and reform the existing policies according to their demands. The governmental authorities should also endorse the risk-sharing function of informal institutions.

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The impact of index‐insured loans on credit market participation and risk‐taking

Cited by 16 publications

References 53 publications

Does bundling credit with index insurance boost agricultural technology adoption? Evidence from Ghana

Does bundling credit with index insurance boost agricultural technology adoption? Evidence from Ghana

Digital opportunities for the distribution of index‐based microinsurance: Evidence from a discrete choice experiment in Mali

Does External Shock Influence Farmer’s Adoption of Modern Irrigation Technology?—A Case of Gansu Province, China

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