Poverty Traps and Index Based Risk Transfer Products
34 Pages Posted: 11 Jul 2007
Date Written: July 2006
A growing literature suggests that in low-income countries, households with few assets can be trapped in chronic poverty. This article reviews relevant threads of the poverty traps literature to motivate a description of the opportunities presented by innovative index-based risk transfer products. These products can be used to address some insurance and credit market failures that contribute to the persistence of poverty among households in low-income countries. Applications are considered at the micro, meso, and macro levels.
Keywords: index-based risk transfer products, insurance, poverty traps, risk management
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