This study assesses the uptake and impact of bundling index insurance with credit and input vouchers through a randomized control trial experiment. Smallholder farmers in Ethiopia are randomly assigned to a control group and three treatment arms, namely: (1) stand-alone index insurance with upfront premium payment, (2) stand-alone index insurance with delayed premium payment, (3) bundled index insurance with credit and delayed premium payment, or (4) bundled index insurance with credit and input vouchers with delayed premium payment. Distinguishing itself from previous studies, our research specifically isolates the impact of bundling from that of delayed premiums. The results highlight the crucial role of the bundled aspect (i.e., credit and inputs), not only in increasing uptake but also in fostering farming investments and productivity.

We employ a discrete choice experiment to elicit demand and supply side preferences for insurance-linked credit, a promising market-based tool for managing agricultural weather risks and providing access to credit for farmers. We estimate preference heterogeneity using primary data from smallholder farmers and managers of lenders/insurers combined with household socio-economic survey data in Kenya. We analyse the choice data using maximum simulated likelihood and Hierarchical Bayes estimation of a mixed logit model. Although there are some similarities, we find that there is conflicting demand and supply side preferences for credit terms, collateral requirements, and loan use flexibility. We also analyse willingness to buy and willingness to offer for farmers and suppliers, respectively, for the risk premium for different attributes and their levels. Identifying the preferred attributes and levels for both farmers and financial institutions can guide optimal packaging of insurance and credit providing market participation and adoption motivation for insurance-bundled credit product.

We employ a discrete choice experiment to elicit demand and supply side preferences for insurance-linked credit, a promising market-based tool for managing agricultural weather risks and providing access to credit for farmers. We estimate preference heterogeneity using primary data from smallholder farmers and managers of lenders/insurers combined with household socio-economic survey data in Kenya. We analyse the choice data using maximum simulated likelihood and Hierarchical Bayes estimation of a mixed logit model. Although there are some similarities, we find that there is conflicting demand and supply side preferences for credit terms, collateral requirements, and loan use flexibility. We also analyse willingness to buy and willingness to offer for farmers and suppliers, respectively, for the risk premium for different attributes and their levels. Identifying the preferred attributes and levels for both farmers and financial institutions can guide optimal packaging of insurance and credit providing market participation and adoption motivation for insurance-bundled credit product.

We use a randomised experiment in Kenya to analyse how smallholder farmers respond to receiving a free hybrid crop insurance product, conditional on purchasing certified seeds. We find that farmers increase effort—increasing total investments and taking more land in production. In addition to adopting more certified seeds, they also invest more in complementary inputs such as fertilizer and hired-in farm-machinery and non-farm labour. We find limited evidence of a change in farming intensity. For example, there is no evidence of ‘crowding-out’ of effort or inputs on a per-hectare basis, even if the indemnity-based component of the insurance product potentially gives rise to asymmetric information problems (moral hazard). We also document that ex post willingness to pay for the insurance product has increased for the treatment group. This suggests that learning about the benefits of (subsidized) insurance outweighs any anchoring effects on the zero price during the pilot study.

Climate risk financing programs in agriculture have caught the attention of researchers and policy makers over the last decade. Weather index insurance has emerged as a promising market-based risk financing mechanism. However, to develop a suitable weather index insurance mechanism it is essential to incorporate the distribution of underlying weather and climate risks to a specific event model that can minimize intraseasonal basis risk. In this paper we investigate the erratic nature of rainfall patterns in Kenya using Climate Hazards Group Infrared Precipitation with Station Data (CHIRPS) rainfall data from 1983 to 2017. We find that the patterns of rainfall are fractional, both erratic and persistent, which is consistent with the Noah and Joseph effects that are well known in mathematics. The erratic nature of rainfall emerges from the breakdown of the convergence to a normal distribution. Instead we find that the distribution about the average is approximately lognormal, with an almost 50% higher chance of deficit rainfall below the mean than adequate rainfall above the mean. We find that the rainfall patterns obey the Hurst law and that the measured Hurst coefficients for seasonal rainfall pattern across all years range from a low of 0.137 to a high above 0.685. To incorporate the erratic and persistent nature of seasonal rainfall, we develop a new approach to weather index insurance based upon the accumulated rainfall in any 21-day period falling below 60% of the long-term average for that same 21-day period. We argue that this approach is more satisfactory to matching drought conditions within and between various phenological stages of growth.

This paper examines the results of randomized experiments in Ethiopia that assess the relevance of bundling index-based insurance (IBI) with credit and inputs. We compare four IBI options and their impact on adoption of modern technologies, consumption and productivity: (1) standard IBI; (2) newly-developed IBI, i.e. promoted via farmer groups and featuring a delayed premium option; (3) new IBI bundled with credit; and (4) new IBI bundled with credit and inputs. We find that only when farmers adopt a package comprised of insurance, credit and inputs, do they significantly increase their investment in modern agricultural technologies and, consequently, productivity grows.

Previous studies indicate that microfinance institutions (MFIs) in Latin America and the Caribbean (LAC) have different operational strategies to MFIs in South Asia (SA). Given the recent emphasis placed on the feasibility of MFIs to achieve the dual goals of outreach and sustainability concurrently, we examine and compare the relationship between sustainability and outreach of MFIs in LAC with MFIs in SA. Our results indicate that trade-offs exist between outreach and sustainability in both regions. However, the severity of trade-off is dependent on which goal MFIs decide to focus on in each region.

Purpose – The purpose of this paper is to review the most recent scientific literature on the determinants explaining the demand for index-insurance, the impact of index-insurance and the existing links between insurance and credit. In this meta-analysis, the authors identify key discoveries on the potential of index-insurance in enhancing credit supply for smallholders and thus farm productivity. Design/methodology/approach – Following a systematic literature search in Scopus and Web of Science, relevant empirical articles were identified by using the following criteria search algorithm: “insurance” and (“weather” or “micro” or “area?based” or “rain*” or “livestock” or “index”), and ((“empiric*” or “experiment” or “trial” or “RCT” or “impact”) or (“credit” or “loan*” or “debt” or “finance”)). The authors identified 1,133 related papers, 110 of which were selected as closely matching the study criteria. After removing duplicates and analysing each document, 45 papers were included in the current analysis. The framework for addressing insurance and credit issues, in the paper, entails three subsequent themes, namely, adoption of insurance, impact of insurance and links between insurance and credit. Findings – It is not confirmed yet that demand for insurance is indeed hump-shaped in risk aversion and the functional form of this relationship should be tested in more detail. This also holds for the magnitude of the effect of trust and education on actual demand. Furthermore, it is unclear to what extent other risk mitigation strategies form complements or substitutes to index-insurance. Lastly, the interaction between basis risk and price is important to the design of index-insurance products. If basis risk and price elasticity are indeed highly correlated, products that diminish basis risk are crucial in increasing demand. On the impact of bundled products, e.g. combination of insurance and credit, limited empirical research has been conducted. For example, it is unknown to what extent credit suppliers would react to the insured status of farmers or what the preferences of farmers are when it comes to a mix of financial products. In addition, several researchers have suggested that microfinance institutions or banks could insure themselves against covariate risk, yet no empirical evidence about this insurance mechanism has been conducted so far. Research limitations/implications – The authors based the research on scientific literature uploaded in Scopus and Web of Science. Other potentially insightful grey literature was not included due to lack of accessibility. Given the research findings, there is plenty of opportunity for further research particularly with regard to the effects of bundled products, e.g. insurance plus credit, on demand for index-insurance, supply of credit, loan conditions and impact on farm productivity and farmers’ well-being. Practical implications – Microfinance institutions, insurance companies, NGOs, research institutions and universities, particularly in developing countries, will be interested to learn about the systematic review of scientific research done in the area of insurance and credit for agriculture and the possibilities for application in their own practice of supplying these financial products. Social implications – A rigorous understanding of the potential of index-insurance and credit is essential for identifying the right mix of financial products that help smallholder farmers to increase farm productivity and their own well-being. Originality/value – The paper is valuable due to its rigorous evaluation of existing theoretical and empirical research around issues explaining the degree of adoption and impact of index-insurance and that of bundled financial products (i.e. index-insurance plus credit). The paper has the potential to become essential reading for academics, practitioners and policy-makers interested in researching and putting in practice the best options leading to greater farm productivity and well-being in developing countries.

The world has responded to climate change phenomenon through two broad response mechanisms (mitigation and adaptation strategies) with the aim of moderating the adverse effects of climate change and/or to exploit any arising beneficial opportunities. The paper aims to examine the trend in climate parameters, farmers’ perception of climate change, constraints faced in production and to identify the strategies (if any) that farmers have adopted to cope with the effects of changing climate. A one-way analysis of variance, percentage analysis and Garrett ranking technique were applied to a set of primary data collected from 150 randomly sampled farmers with the aid of questionnaires in three purposively selected provinces through the months of June to August 2015. The analytical results of obtained recent weather data revealed that the climate parameters have significantly changed over time and these were substantiated by farmers’ experiences. The farmers are engaging in various climate-response strategies, among which, the planting of drought-tolerant varieties is most common. Therefore, it is important to enhance farmers’ access to improved drought-tolerant seeds and efficient irrigation systems. Also observed, is that the lack of awareness of insurance products and inability to afford insurance premiums were the principal reasons majority of the farmers did not have insurance. These present a need to strengthen insurance adoption among farmers through various supporting programmes that may include premium subsidies and media outreach. The paper under one platform provides evidence of changing climate, farmers’ responses towards mitigating perceived adverse effects of the changed climate, and South Africa’s national policy on adaptation and mitigation.

This paper analyses capital flows to Peru in the early 1990s, in the context of the radical stabilisation and reform programme undertaken by the Fujimori government. The needs of reducing inflation I combined with the surge of capital inflows led to a rapid overvaluation of the currency. Together with rapidly rising outputl this led to a large increase in the current account deficit. This implied an important source of Balance of Payments vulnerability I especially as a relatively large share of capital flows were potentially volatile. This potential vulnerability of the Peruvian economy was clearly perceived as it occurred just after the Mexican peso crisis. Adjustment took place emphasising expenditure reducing policies I which implied a significant reduction of growth. The alternative of relying -at least in parton expenditure switching policies I which would have been less costly in terms of reduced growth, was not used.

This paper studies the ‘wholesale’ market through which microfinance institutions (MFIs) in Peru, Tanzania and the state of Tamil Nadu in India obtain loans from a variety of domestic and international funding bodies. The focus is on the extent to which patterns in wholesale lending relationships relate to the legal status and characteristics of MFIs; to the regulatory, business and social environment in which they operate and to shifts in the balance between social and commercial interests of diverse types of lenders. The analysis, with data on 120 microfinance organisations over the period 2006–2008, brings to light considerable cross-country variation and relates it primarily to differences in governance and regulation.

Poverty is ostensibly a multi-dimensional issue. Economic, social and political forces play a role in its creation as well as in its eradication. Financial inclusion, understood as the provision of micro-loans to populations that have never before had access to lending, has for some time been considered a useful way to help reduce poverty. In this paper, we employ a panel data analysis based on a unique 2008-2010 database on financial inclusion in Peru. Exploiting the variation between departments, our regression results show that financial inclusion does have an alleviating effect on various indicators of poverty. However, coefficients are rather small. Instead, the access to communication technology, such as the internet, plays a superior role in explaining poverty in Peru.