Bundling Weather Index-Based Crop Insurance and Credit: A Cautionary Tale Against Misunderstood and Misinformed Take-Up

21 Pages Posted: 12 Jan 2020

See all articles by Mame Mor Anta Syll

Mame Mor Anta Syll

University of Orleans, Laboratoire d'économie d'Orléans; Université Gaston Berger de Saint-Louis, Students; Initiative Prospective Agricole et Rurale (IPAR)

Lena Weingärtner

Overseas Development Institute (ODI)

Date Written: December 19, 2019

Abstract

The initial purpose of this study was to evaluate the effect of different bundling options of weather index-based crop insurance with agricultural credit on levels of insurance take-up. In a randomised controlled trial, 371 loan applicants were offered credit-linked insurance in three different ways: (1) mandatory bundling of products and incentivising insurance take-up by making it a partial supplement to loan collateral, (2) voluntary insurance with the same incentive and (3) voluntary insurance without incentive. However, we will quickly realize that the take-up of the bundle is mostly related to an issue of understanding, level of knowledge or information interpretation rather than to the way of bundling. Though the level of take-up appeared to be high, no matter the bundling option, results revealed that it was a misunderstood take-up based on the insufficient level of information or inappropriate interpretation of it. More effort is hence needed from development stakeholders to make sure the product value of insurance, namely a risk transfer instrument, is fully grabbed by farmers who purchase it.

Keywords: crop insurance; credit; bundle; understanding; information; uptake decision, RCT

JEL Classification: D81, G20, O16, C93

Suggested Citation

Syll, Mame Mor Anta and Weingärtner, Lena, Bundling Weather Index-Based Crop Insurance and Credit: A Cautionary Tale Against Misunderstood and Misinformed Take-Up (December 19, 2019). Available at SSRN: https://ssrn.com/abstract=3507421 or http://dx.doi.org/10.2139/ssrn.3507421

Mame Mor Anta Syll (Contact Author)

University of Orleans, Laboratoire d'économie d'Orléans ( email )

Orléans cedex 2
France

Université Gaston Berger de Saint-Louis, Students ( email )

Senegal

Initiative Prospective Agricole et Rurale (IPAR) ( email )

Keur Jacques Faye, Immeuble Bilguiss, 67,
Rond-Point VDN - Ouest Foire
Dakar-Fann, BP 16788
Senegal
(221) 33.869.00.79 (Phone)
(221) 33868.05.38 (Fax)

HOME PAGE: http://https://www.ipar.sn/

Lena Weingärtner

Overseas Development Institute (ODI) ( email )

111 Westminister Bridge Rd.
London, SE17JD
United Kingdom

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