Study title

Randomized experiment in Ethiopia that assesses the relevance of bundling index-based insurance with credit and access to inputs. We compare four index-based insurance options in terms of their impact on adoption of modern technologies, consumption and productivity: (1) a standard index-based insurance product; (2) a newly developed index-based insurance product that is promoted via farmer groups and has a delayed premium option; (3) the newly developed index-based insurance product bundled with a credit option and (4) the newly developed index-based insurance product bundled with credit and an input purchasing option. We find that allowing farmers to postpone premium payment improves uptake and consumption expenditures significantly. However, in order to increase investment in modern agricultural technologies and productivity, which is highly important for long run growth in the agricultural sector, bundling insurance with credit and access to inputs is needed. Our analysis shows that only when farmers adopt a package comprised of insurance, credit and inputs, do they significantly increase their investment in modern agricultural technologies and, consequently, farm productivity improves.Farm households in Africa must cope with bad conditions as to soil quality, weather and infrastructure. The variability of rainfall causes yields to vary strongly from one year to the next. With yields already low (due to poor soil condition) these variations can be life threatening. Meanwhile, inadequate infrastructure makes it difficult to help the households with access to financial services, insurance and inputs that could stabilize their access to resources, and enhance yields. Solving a single aspect, say bringing inputs to the farm, will not be sufficient as credit is also needed. But credit can only be provided if sufficient likelihood exists that loans will be repaid. Here, insurance can help. If insurance of the loan makes it attractive enough for the lender, a...