Parametric Insurance and Technology Adoption in Developing Countries

44 Pages Posted: 13 Jul 2020 Last revised: 24 Nov 2020

See all articles by Enrico Biffis

Enrico Biffis

Imperial College Business School

Erik Chavez

Imperial College London

Alexis Louaas

Ecole Polytechnique, Paris - Department of Economic Sciences

Pierre Picard

Ecole Polytechnique, Paris - Department of Economic Sciences

Date Written: November 5, 2020

Abstract

Technology adoption is crucial for the development of low income countries. This paper investigates how parametric insurance can contribute to improving access to finance, and hence to technology, for smallholder farmers. In a model with moral hazard, we show that bundling parametric insurance with loans may lower collateral requirements, thus promoting the financial inclusion of poor households. The case of agricultural input loans and weather-index insurance is studied in detail and related to bundled finance solutions recently piloted among smallholder farmers in Tanzania.

Keywords: parametric insurance, crop insurance, moral hazard, credit rationing, technology adoption

JEL Classification: G22, O16, 031, Q14

Suggested Citation

Biffis, Enrico and Chavez, Erik and Louaas, Alexis and Picard, Pierre, Parametric Insurance and Technology Adoption in Developing Countries (November 5, 2020). Available at SSRN: https://ssrn.com/abstract=3630706 or http://dx.doi.org/10.2139/ssrn.3630706

Enrico Biffis (Contact Author)

Imperial College Business School ( email )

Imperial College London
South Kensington campus
London, SW7 2AZ
United Kingdom

Erik Chavez

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Alexis Louaas

Ecole Polytechnique, Paris - Department of Economic Sciences ( email )

Ecole Polytechnique
Department of Economics
Paris, 75005
France

Pierre Picard

Ecole Polytechnique, Paris - Department of Economic Sciences ( email )

Ecole Polytechnique
Department of Economics
Paris, 75005
France

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