Motivation:
Uninsured smallholder farmers in developing countries face severe threats to their livelihoods from unpredictable weather events, often spurred by changing climate.[1] Women disproportionately experience the worst effects of these shocks, such as a diminished intake of essential nutrients.[2] While many governments in Africa and South Asia support smallholders in attaining crop insurance, few farmers–especially female farmers– purchase insurance.[3] Despite the numerous benefits of weather-index insurance, such as risk management and mitigation, studies have demonstrated that women prefer informal insurance strategies or to be self-insured.[4] There are numerous reasons for this trend, but most pertinent to women’s economic empowerment (WEE) is that typical insurance contracts contain multiple barriers that can deter women from signing., These barriers include requiring women to pay premiums before the growing season, when they have less liquidity, and collecting large sums which women may have little agency and decision-making power over.[5] Identifying ways to make crop insurance more accessible to women is therefore critical for empowering women to take advantage of this risk-mitigating product.
Objective:
The primary aim of this project is to evaluate how using digital financial services (DFS) to distribute crop insurance to farmers in Kenya might improve women’s interest in and uptake of this type of insurance. Specifically, this study seeks to understand how modifying insurance contracts to allow for smaller incremental transfers over a period of time might contribute to WEE by enabling women to have agency over their insurance payments. These questions will be explored through an intervention that will adapt Acre Africa’s traditional weather-index insurance contract to include two new features: flexible payout disbursement and flexible premium payments enabled through mobile money. The intervention will be offered to 1,600 farmers in the Kakamega, Nyieri, and Vihiga counties of Kenya. Testing will be conducted at multiple phases of the trial to elicit information about the outcomes being measured. Willingness to accept, willingness to pay, and women’s economic empowerment will be measured through a survey given to farmers before they choose their insurance plan. Insurance uptake will be measured using administrative data documenting farmers’ decisions to continue with their plan after the farming season ends.
Proposed impact:
The researchers hypothesize that women will be more willing to pay for crop insurance if contracts offer a flexible timeline for payment and compensation. Women especially stand to benefit from crop insurance because insurance against unpredictable natural disasters promotes resiliency and financial control. If the intervention of flexible payout disbursements and premium payments proves to be effective and sustainable, there is a possibility that Acre Africa, a leading innovative insurance company, will make flexible payments a permanent component of their crop insurance products. This outcome would enable over 1.7 million smallholder farmers in East Africa the opportunity to be insured, while also following a flexible payment schedule that works best for them.
[1] Dercon, S. (2002). Income risk, coping strategies, and safety nets. The World Bank Research Observer, 17(2), 141-166.
[2] Eastin, J. (2018). Climate change and gender equality in developing states. World Development, 107,
289-305.
[3]Cole, S., Giné, X., Tobacman, J., Topalova, P., Townsend, R., & Vickery, J. (2013). Barriers to household risk management: Evidence from India. American Economic Journal: Applied Economics, 5(1), 104-35.
[4] Delavallade, C., Dizon, F., Hill, R. V., & Petraud, J.P. (2015) Managing risk with insurance and savings: Experimental evidence for male and female managers in West Africa. IFPRI Discussion Paper 1426. Washington, D.C.: International Food Policy Research Institute (IFPRI); Clarke, D.J. & Kumar, N. (2015). Microinsurance decisions: Gendered evidence from rural Bangladesh. IFPRI Discussion Paper 1465. Washington, D.C.: International Food Policy Research Institute (IFPRI); Akter, S., Krupnik, T. J., Rossi, F., & Khanam, F. (2016). The influence of gender and product design on farmers’ preferences for weather-indexed crop insurance. Global Environmental Change, 38, 217-229.
[5] Jack, W., & Suri, T. (2014). Risk sharing and transactions costs: Evidence from Kenya’s mobile money revolution. American Economic Review, 104(1), 183-223.
