Posted on September 14, 2009 - by boris

Why the world’s poor refuse insurance?…

There are higher-yielding varieties of groundnut than those that farmers in Malawi tend to plant, but getting them to switch is tough. Better seed is pricey, increasing their risk. So researchers from the World Bank ran an experiment. With local NGOs, they offered the farmers loans.

Some loans even came with a crop-insurance policy: if the season was dry and the yield a dud, the debt would be forgiven. The farmers’ risk was lowered. Of farmers offered conventional loans, 33% signed up. With the added incentive of insurance, 18% did. The researchers were puzzled.

It’s been more than 30 years since microfinance began its fantastic rise, spreading billions of dollars in credit to hundreds of millions of overlooked borrowers around the world. Insurance is the next big promise of financial services for the poor.

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Source: http://www.indiamicrofinance.com/microfinance/microinsurance-india/why-the-worlds-poor-refuse-insurance.html