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Membership Based Indigenous Insurance Associationsin Ethiopia and Tanzania

Stefan Dercon (QEH), Joachim De Weerdt, Tessa Bold, Alula Pankhurst
Authors registered in the RePEc Author Service: Stefan Dercon, Joachim De Weerdt and Tessa Bold

QEH Working Papers from Queen Elizabeth House, University of Oxford

Abstract: Indigenous insurance associations are a prevalent form of membership based organisations of the poor, at least in the rural areas in Ethiopia and Tanzania surveyed by the authors. Results show how villagers with few links to any formal kind of insurance market have established membership-based indigenous insurance associations to protect themselves against unexpected expenditures, mainly for funerals and hospitalisation. Many of these institutions tend to co-exist within the same community and are based on well-defined rules and regulations, well beyond informal reciprocal relations. They tend to offer premium-based insurance for funeral expenses, as well as, in many cases, other forms of insurance and credit to help address hardship. These groups are completely owned and managed by their members. They were locally initiated and have been continually developing through the actions of their own members, without involvement from the government or donors. Using detailed group membership data linked to household survey data we show that (i) these institutions are widely prevalent in the surveyed areas, (ii) households typically belong to several groups at the same time, (iii) they display a large degree of inclusiveness and (iv) they insure an important part of some shocks, but still leave households prone to the effects of risk

New Economics Papers: this item is included in nep-afr, nep-dev, nep-ias and nep-mfd
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