Heterogeneous demand and supply for an insurance-linked credit product in Kenya: A stated choice experiment approach

Apurba Shee, Calum Turvey and Ana Marr

No 29186, Greenwich Papers in Political Economy from University of Greenwich, Greenwich Political Economy Research Centre

Abstract: We employ a discrete choice experiment to elicit demand and supply side preferences for insurance- linked credit, a promising market-based tool for managing agricultural weather risks and providing access to credit for farmers. We estimate preference heterogeneity using primary data from smallholder farmers and managers of lenders/insurers combined with household socio-economic survey data in Kenya. We analyse the choice data using maximum simulated likelihood and Hierarchical Bayes estimation of a mixed logit model. Although there are some similarities, we find that there is conflicting demand and supply side preferences for credit terms, collateral requirements, and loan use flexibility. We also analyse willingness to buy and willingness to offer for farmers and suppliers, respectively for the risk premium for different attributes and their levels. Identifying the preferred attributes and levels for both farmers and financial institutions can guide optimal packaging of insurance and credit providing market participation and adoption motivation for insurance-bundled credit product.

Keywords: Insurance-linked credit; choice experiment; Kenya; random parameter logit; willingness to pay; maximum simulated likelihood; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: Q11 Q14 Q18 (search for similar items in EconPapers)
Date: 2020-09-12
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Citations: View citations in EconPapers (2)

Published in Journal of Agricultural Economics 1.72(2020): pp. 244-267

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http://gala.gre.ac.uk/id/eprint/29186/19/29186%20M ... ct_%28OA%29_2020.pdf

Related works:
Journal Article: Heterogeneous Demand and Supply for an Insurance‐linked Credit Product in Kenya: A Stated Choice Experiment Approach (2021)
Working Paper: Heterogeneous Demand and Supply for an Insurance-Linked Credit Product in Kenya: A Stated Choice Experiment Approach (2019)
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