At FAI, we believe the more rigorous analysis of microfinance takes place, the better. So we were interested to see the results of two new randomized control trials (RCTs) of microinsurance programs.

The first trial was conducted last fall by researchers from Peking University and the University of Pennsylvania in southwestern China to look at insurance for pig farmers. They found that offering formal insurance significantly increased farmers’ tendency to raise sows. At the same time, client take-up of the microinsurance product was low, suggesting that the program offering was less than optimal. The researchers suggest that this could be due to lack of trust in government-sponsored programs.

The second RCT conducted by a group of researchers from institutions including the University of Michigan and Harvard looks at voluntary health insurance for informal sector workers in Nicaragua. Take-up in this program was low as well, with only 20 percent enrollment. Costs and bureaucratic procedures had an important effect on participation. The researchers found that institutional and contextual factors accounted for the limited success of the program – again pointing to the importance of program and product design.

With so little serious impact research available on microfinance, each new bit of hard evidence is an event not to be missed – and sheds light on how microfinance programs and products could be better tailored to meet the needs of poor clients.