Macroinsurance for microenterprises: A randomized experiment in post-revolution Egypt

Matthew Groh and David McKenzie

Journal of Development Economics, 2016, vol. 118, issue C, 13-25

Abstract: Firms in many developing countries cite macroeconomic instability and political uncertainty as major constraints to their growth. We conduct a randomized experiment in post-revolution Egypt to measure the impact of insuring microenterprises against this uncertainty. Demand for macroeconomic shock insurance was high, with a take-up rate of 36.7%. However, purchasing insurance does not change the likelihood a business takes a new loan, the size of the loan, or how they invest this loan. We attribute this lack of effect to microenterprises largely investing in inventories and raw materials rather than irreversible investments like equipment, suggesting that macroeconomic and political risk is not inhibiting their investment behavior. The challenges of introducing an innovative insurance product in an environment where microentrepreneurs had little previous insurance exposure are particularly evident in a second year, where take-up was extremely low following political events that came close to, but did not, trigger insurance pay-outs.

Keywords: Microenterprises; Uncertainty; Risk; Insurance; Political instability; Egypt (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Macroinsurance for Microenterprises: A Randomized Experiment in Post-Revolution Egypt (2014)
Working Paper: Macroinsurance for microenterprises: a randomized experiment in post-revolution Egypt (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:118:y:2016:i:c:p:13-25

DOI: 10.1016/j.jdeveco.2015.08.003

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