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                          enGender Impact: The World Bank’s Gender Impact Evaluation Database



              Insurance, credit, and technology adoption: Field experimental evidence from Malawi

 Author(s)    Xavier Gine and Dean Yang
  Contact     xgine@worldbank.org

  Country     Malawi
Organizing
              Economic Opportunities and Access to Assets
 Theme
   Status     Completed
Intervention
             Credit and insurance
  Category
   Sector     Agriculture and Rural Development
              Does production risk suppress the demand for credit? We implemented a randomized field experiment to ask whether
              provision of insurance against a major source of production risk induces farmers to take out loans to adopt a new crop
              technology. The study sample was composed of roughly 800 maize and groundnut farmers in Malawi, where by far the
              dominant source of production risk is the level of rainfall. We randomly selected half of the farmers to be offered credit to
              purchase high-yielding hybrid maize and groundnut seeds for planting in the November 2006 crop season. The other half
              of farmers were offered a similar credit package, but were also required to purchase (at actuarially fair rates) a weather
 Abstract
              insurance policy that partially or fully forgave the loan in the event of poor rainfall. Surprisingly, take-up was lower by 13
              percentage points among farmers offered insurance with the loan. Take-up was 33.0% for farmers who were offered the
              uninsured loan. There is suggestive evidence that reduced take-up of the insured loan was due to farmers already having
              implicit insurance from the limited liability clause in the loan contract: insured loan take-up was positively correlated with
              farmer education, income, and wealth, which may proxy for the individual's default costs. By contrast, take-up of the
              uninsured loan was uncorrelated with these farmer characteristics.
 Gender
              Gender Informed Analysis
Connection
 Gender
              Gender disaggregated access to credit
Outcomes
 IE Design    Clustered Randomized Control Trial (Clustered at locality level)
             Out of 32 localities, half were selected and offered credit to purchase high-yielding hybrid maize and groundnut seeds.
Intervention The other half were offered credit and were required to purchase insurance if they accepted the loan. The loans were
             offered by local microfinance institutions as group liability contracts for clubs of 10-20 farmers.
Intervention
             The farmers were offered loans for the November 2006 planting season.
   Period
   Sample
             The sample was comprised of about 800 groundnut farmers in 32 localities in central Malawi.
 population
Comparison Farmers who were offered loans were compared to farmers who were offered loans that required the purchase of
 conditions insurance.
   Unit of
             Individual Level
  analysis
 Evaluation
             A baseline survey was conducted in September 2006 and the loans were offered in October.
   Period
             Takeup of the loan was significantly smaller when the individual was required to purchase insurance with the loan (33%
   Results
             compared to 17.6%). The results are not significantly different between men and women.

             Last updated: 14 August 2013                                                                        1
                            enGender Impact: The World Bank’s Gender Impact Evaluation Database


  Primary
    study       There are small but weakly significant difference between treatment and control group.
limitations
  Funding
                Agriculture and Risk Management (World Bank)
   Source
                Giné, X., & Yang, D. (2009). Insurance, credit, and technology adoption: Field experimental evidence from Malawi.
Reference(s)
                Journal of Development Economics, 89(1), 1-11.
  Link to
  Studies       http://www.sciencedirect.com/science/article/pii/S0304387808000898
 Microdata
                http://microdata.worldbank.org/index.php/catalog/1541http://microdata.worldbank.org/index.php/catalog/1541




               Last updated: 14 August 2013                                                                   2