IFPRI Gender Methods Seminar, April 1, 2015: Managing Risk with Insurance and Savings: Experimental Evidence for Male and Female Farm Managers in West Africa

Managing risk with insurance and savings:Experimental Evidence for male and female farm managers in West Africa

Clara Delavallade (MTID)

RISE – March 2015

with Ruth Hill (World Bank)Felipe Dizon (UC Davis)Jean-Paul Petraud (IMPAQ)

Motivation

• Individuals in developing countries are subject to a multitude of hazards– Covariant shocks (droughts, unpredictable rainfall)

– Idiosyncratic shocks (falling sick)

• Men and women may face different risks and have different risk management strategies

• Literature on specific risk-mitigating instruments– Weather index insurance (Cole et al 2013, Mobarak and Rosenzweig 2013)

– Access to savings accounts (Dupas and Robinson 2013)

– Micro-health insurance products (Thornton et al 2012, Dercon et al 2011, Delavallade 2014)

Research Questions

Which product might be better to help farmers cope with different risks?

Do men and women have different demand for different types of products?

What are the implications for

their ability to manage risk

their agricultural investments and production

their consumption and welfare?

Compare demand for and effectiveness of different types of risk-mitigating products by randomizing their provision

Four financial products

• Insurance (T1): weather index product designed by Planet Guarantee (NGO) to cover main crop in the area and offered by local financial institutions

• Senegal: rainfall index, IFPRI mediated

• Burkina Faso: NDVI, local NGO mediated

• Agricultural savings at home (T2): sealed envelope with purpose of savings written on it (low commitment)

• Agricultural savings with the treasurer (T3): money given to group treasurer for purpose of ag input, could request money from treasurer at any time, interest paid if kept with treasurer for one month (high commitment)

• Emergency savings with the treasurer (T4): as above, but purpose was for emergency – mostly health issues (high commitment)

• Sample = 800 farmers in Senegal and Burkina Faso (same design)

• Baseline survey conducted and invitation to experimental session the following day

• 40 experimental sessions: – Monetary endowment of 6,000 CFA = $12 (cost of ½ bag of fertilizer) – Randomly offered one of four financial products and given the choice

of how much of the 6,000 CFA to allocate to the product and how much to take home

– Exogenously determined price or interest rate (by session)

• Midline survey (and input fair) after 1 month

• Endline survey after 6 months (after harvest)

Experimental Design

Sample Description

Table 2 - Sample Description

Senegal Burkina Faso

Panel A: Baseline Sample

Total number of individuals surveyed at baseline 403 403

Number of ROSCAS 7 7

Number of participants 200 203

Percentage female (in %) 100 100

Number of farmers' groups 9 8

Number of participants 203 200

Percentage female (in %) 4.4 47.5

Panel B: Endline

Number of individuals in initial sample not found at endline 1 1

Percentage of baseline sample (in %) 0.25 0.25

Total number of individuals surveyed at endline 402 402

Percentage female (in %) 50.60 71.98

Demand: Take-Up

Table 5: Take-up: Amount invested in financial product

Burkina Faso Senegal

Mean sd Median N Mean sd Median N

Amount invested in insurance product2 178 1 167 2 000 101 1 575 1 127 1 000 100

Amount invested in envelope3 345 1 804 3 000 100 3 896 1 624 4 000 101

Amount invested in agricultural investment savings product 4 307 1 756 5 000 101 3 115 1 542 3 000 100

Amount invested in emergency savings product4 930 1 479 6 000 100 2 847 1 841 3 000 101

Amount re-invested in emergency saving one month later 2 212 1 790 2 000 99 2 079 1 673 2 000 101

Demand: Take-Up Correlates(1) (2)

Insurance Savings

Male 570.66 -613.27

[241.80]** [356.44]*

Burkina Faso 319.27 1,557.92

[210.06] [266.06]***

Agricultural savings 200.44

[473.55]

Agricultural savings * male 702.91

[316.25]**

Low commitment savings 1,000.70

[381.84]**

Controls Yes Yes

Sample T1 T2,T3,T4

Observations 201 603

R-squared 0.25 0.17

Impact: Model Specification

• Impact of different treatments:

• LATE:

– instrument the amount of insurance invested by:• insurance treatment• day on which insurance was offered

– instrument the amount of savings undertaken by:• type of savings instrument randomly offered • interest rate

𝑦𝑖𝑡 = 𝛽0 + 𝛽𝑇𝑇𝑖 + 𝛽𝑦𝑦𝑖,𝑡=0 + 𝛽𝐵𝐹𝐵𝐹𝑖 + 𝛽𝑀𝑀𝑎𝑙𝑒𝑖 + 𝜀𝑖𝑡

Impact of insurance (LATE) on ag

investment(1) (2) (3) (4) (5)

After one month Over whole season

Total

spending

Fertilizer per

acre

Fertilizer per

acre

Land

cultivated Yield

Insurance amount

(FCFA)

0.0003 0.0002 0.0002 -0.0001 0.0001

[0.0001]** [0.0001]* [0.0001]* [0.0002] [0.0000]*

Agricultural savings

0.1230 0.2881 0.0444 0.3922 0.1209

[0.3051] [0.1721]* [0.1861] [0.8965] [0.0634]*

Low commitment

savings

0.0656 -0.6254 -0.2068 -0.8998 -0.0206

[0.4559] [0.2664]** [0.2445] [0.7210] [0.0617]

Male 1.0251 0.8204 0.4798 1.7119 0.0990

[0.4104]** [0.3271]** [0.3525] [0.8374]** [0.0765]

Constant 9.6026 1.4609 3.2106 6.6218 -0.1671

[0.4796]*** [0.3128]*** [0.3353]*** [0.7969]*** [0.0650]**

Controls Yes Yes Yes Yes Yes

Observations 804 780 781 787 804

R-squared 0.0529 0.0752 0.0448 0.0234 0.0088

Impact of Savings (ITT) on Ag Investment

(1) (2) (3) (4) (5)

After one month Over whole season

Total

spending

Fertilizer per

acre

Fertilizer per

acre

Land

cultivated Yield

Agricultural savings

0.04 0.03 -0.18 0.20 0.08

[0.30] [0.19] [0.17] [0.94] [0.06]

Low Commitment

Savings

0.02 -0.59 -0.11 -0.98 -0.02

[0.50] [0.26]** [0.21] [0.65] [0.06]

Low Commit* Burkina

Faso

0.49 0.24 0.58 -0.13 -0.05

[0.59] [0.33] [0.27]** [1.05] [0.07]

Burkina Faso -1.54 0.57 0.30 -0.31 -0.07

[0.50]*** [0.31]* [0.29] [0.97] [0.08]

Male 0.86 0.51 0.03 1.81 0.14

[0.37]** [0.28]* [0.24] [0.89]** [0.09]

Controls Yes Yes Yes Yes Yes

Observations 603 571 570 581 603

R-squared 0.13 0.19 0.28 0.11 0.09

Impact of Experimental Savings

(LATE) on Ag Investment(1) (2) (3) (4) (5)

After one month Over whole season

Total spending

Fertilizer per

acre

Fertilizer per

acre

Land

cultivated Yield

Amount saved 0.0001 0.0010 0.0007 0.0001 0.0009

[0.0009] [0.0010] [0.0008] [0.0002] [0.0020]

Burkina Faso -1.2669 -0.8385 -0.5310 -0.2348 -2.3897

[1.6896] [1.7916] [1.3335] [0.3741] [3.4828]

Male 1.0254 0.9624 0.4970 0.1427 1.8254

[0.4217]** [0.3910]** [0.4191] [0.1083] [1.0597]*

Constant 9.4292 -1.5551 1.2575 -0.5763 3.7750

[2.7792]*** [3.1309] [2.4265] [0.7056] [6.2733]

Controls Yes Yes Yes Yes Yes

Observations 603 588 587 603 591

R-squared 0.0454 -0.5038 -0.2291 -0.1482 0.0019

Impact of insurance (ITT) on

consumption and managing shocks

(1) (2) (3) (4) (5) (6)

After one month After harvest

Degree of

food

insecurity

Days ate

meat, fish,

rice or

onions

Degree of

food

insecurity

Days ate

meat, fish,

rice or

onions

Days before

buying

medicine

Used household

liquidity to manage

shock

Insurance 0.07 1.66 -0.12 -0.11 -0.01 0.04

[0.09] [0.67]** [0.18] [0.72] [0.24] [0.02]*

Burkina Faso 0.36 -6.68 0.17 -12.85 -1.42 0.05

[0.16]** [0.89]*** [0.25] [0.98]*** [0.20]*** [0.02]**

Male -0.38 0.57 -0.28 0.68 -0.46 -0.01

[0.12]*** [0.78] [0.24] [0.95] [0.23]* [0.02]

Controls Yes Yes Yes Yes Yes Yes

Observations 804 796 804 791 804 794

R-squared 0.17 0.19 0.21 0.31 0.04 0.02

Main Findings

• Purchasing insurance increased input spending and use more than savings. Those who purchased more insurance realized higher average yields, and were better able to manage food insecurity and shocks.

• But women invest significantly less in the insurance product.

• Given the impact of purchasing insurance on agricultural investment, yields and wellbeing, lower take-up of agricultural insurance disadvantages women’s productivity, resilience and welfare.

• Need to inform how new financial products, such as index insurance products currently becoming more available, are designed to meet the needs of both men and women.

Thank you !

Additional slides

Impact of Total Savings (LATE) on

Agricultural Investment (1) (2) (3) (4) (5) (6) (7)

After one month Over whole season

Total spending

Spending at

fair

Other

spending on

inputs

Fertilizer per

acre

Fertilizer per

acre Land cultivated Yield

Total savings 0.0000 -0.0000 0.0000 0.0000 0.0000 0.0001 -0.0000

[0.0000] [0.0000] [0.0000] [0.0000] [0.0000] [0.0001] [0.0000]

Burkina Faso -1.7156 4.1041 -3.0533 -0.0157 0.0452 -2.4343 0.1058

[0.8267]** [0.8664]*** [0.9889]*** [0.7114] [0.5635] [1.6519] [0.1217]

Male 0.6745 0.1063 1.1672 0.3521 0.0815 0.6106 0.2305

[0.5542] [0.9400] [0.7416] [0.4534] [0.4356] [1.2674] [0.1118]**

Constant 9.6516 0.6669 7.9395 1.5363 3.3000 6.5275 -0.1626

[0.5393]*** [0.5994] [0.5924]*** [0.4248]*** [0.3625]*** [1.2121]*** [0.0851]*

Observations 603 603 603 588 587 591 603

R-squared -0.1423 0.0855 -0.1536 -0.9410 -0.5835 -0.3855 -0.7570

Notes: Robust standard errors in brackets *** p<0.01, ** p<0.05, * p<0.1. The sample is T2, T3 and T4

Other control variables included: ag savings, low commitment savings, low commitment X Burkina Faso