In this paper, the authors examine the impacts of access to formal microinsurance on economic development as measured by sow production. The study looks at two aspects to determine the impact of insurance. The first examines the impact on economic outcomes for farmers when they have access to formal vs. informal insurance. The second part highlights the vital importance of trust in insurance related transactions and how it factors into the insurance purchase decision.

The full paper can be accessed here

When CARE India field officers delivered emergency relief services to the coastal regions ravaged by the 2004 tsunami, they were struck by the communities’ vulnerability to shocks and lack of access to appropriate risk protection tools, and assessed that microinsurance could be an effective product for these communities. Out of this determination, the CARE Insure Lives and Livelihoods (ILAL) microinsurance program was born. In collaboration with Allianz SE and Bajaj Allianz, CARE India designed a broad, long-term formal microinsurance program. The ILAL approach prioritized clients’ understanding of the value of insurance over purchasing a policy: the ultimate objective of the program was not to distribute policies, but to improve communities’ risk management capacities by improving their understanding of insurance.

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Evaluates the presence of market imperfections such as free-riding in group-based mechanisms.

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This brief offers insight into the ways poor households manage risks. Based on the financial diaries research outlined in Portfolios of the Poor: How the World’s Poor Live on $2 a Day, this brief outlines the formal and informal risk management tools used by poor households in Bangladesh, India and South Africa, such as insurance and savings, and examines how these tools can be improved to help the poor mitigate risk and plan for the future.

Translated versions of this research brief can be accessed in Spanish and French.

This note reviews why risk management is both important and difficult for the poor, and how access to insurance is being expanded.

Group liability in microcredit purports to improve repayment rates through peer screening, monitoring, and enforcement. However, it may create excessive pressure, and discourage reliable clients from borrowing. Two randomized trials tested the overall effect, as well as specific mechanisms. The first removed group liability from pre-existing groups and the second randomly assigned villages to either group or individual liability loans. In both, groups still held weekly meetings. We find no increase in default and larger groups after three years in pre-existing areas, and no change in default but fewer groups created after two years in the expansion areas.

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Most academic and development policy discussions about microentrepreneurs focus on credit constraints, and assume that subject to those constraints the entrepreneurs manage their business optimally. Yet the self-employed poor rarely have any formal training in business skills. A growing number of microfinance organizations are attempting to build the human capital of micro-entrepreneurs in order to improve the livelihood of their clients and help further their mission of poverty alleviation. Using a randomized control trial, we measure the marginal impact of adding business training to a Peruvian group lending program for female microentrepreneurs. Treatment groups received thirty to sixty minute entrepreneurship training sessions during their normal weekly or monthly banking meeting over a period of one to two years. Control groups remained as they were before, meeting at the same frequency but solely for making loan and savings payments. We find evidence that the treatment led to limited improvements in business knowledge, practices and revenues. For the microfinance institution, the program increased client retention rates. There is also suggestive evidence that effects were larger for those that expressed less interest in training before the program began. This could have important implications for implementing similar market-based interventions with a goal of recovering costs.

Estimates the presence and importance of adverse selection and moral hazard in a consumer credit market using a randomized field experiment methodology.

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