IDEAS home Printed from https://ideas.repec.org/a/bla/agecon/v54y2023i6p778-792.html
   My bibliography  Save this article

Does bundling credit with index insurance boost agricultural technology adoption? Evidence from Ghana

Author

Listed:
  • Khushbu Mishra
  • Richard A. Gallenstein
  • Abdoul G. Sam
  • Mario J. Miranda
  • Patricia Toledo
  • Francis Mulangu

Abstract

The adoption of advanced agricultural technologies in Sub‐Saharan Africa remains disappointingly low, particularly among the millions of poor smallholders who account for most of the agricultural production. We conducted a randomized control trial in Ghana to assess the impact of easing drought‐risk constraints in the agricultural credit market, by bundling joint liability agricultural loans with index insurance, on smallholder farmers’ agricultural technology adoption decisions. In the micro‐insurance treatment, any index insurance payouts go directly to farmers, while in the meso‐insurance treatment, payouts are issued to banks to be used to expunge farmers’ debts. We find evidence that bundling joint liability lending with micro‐insurance increases adoption of fertilizer.

Suggested Citation

  • Khushbu Mishra & Richard A. Gallenstein & Abdoul G. Sam & Mario J. Miranda & Patricia Toledo & Francis Mulangu, 2023. "Does bundling credit with index insurance boost agricultural technology adoption? Evidence from Ghana," Agricultural Economics, International Association of Agricultural Economists, vol. 54(6), pages 778-792, November.
    • Handle: RePEc:bla:agecon:v:54:y:2023:i:6:p:778-792
    DOI: 10.1111/agec.12806
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/agec.12806
    Download Restriction: no
    File URL: https://libkey.io/10.1111/agec.12806?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Ghatak, Maitreesh & Guinnane, Timothy W., 1999. "The economics of lending with joint liability: theory and practice," Journal of Development Economics, Elsevier, vol. 60(1), pages 195-228, October.
    2. John P Dougherty & Richard A Gallenstein & Khushbu Mishra, 2021. "Impact of Index Insurance on Moral Hazard in the Agricultural Credit Market: Theory and Evidence from Ghana," Journal of African Economies, Centre for the Study of African Economies, vol. 30(5), pages 418-446.
    3. Esther Duflo & Michael Kremer & Jonathan Robinson, 2008. "How High Are Rates of Return to Fertilizer? Evidence from Field Experiments in Kenya," American Economic Review, American Economic Association, vol. 98(2), pages 482-488, May.
    4. Dean Karlan & Robert Osei & Isaac Osei-Akoto & Christopher Udry, 2014. "Agricultural Decisions after Relaxing Credit and Risk Constraints," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(2), pages 597-652.
    5. Olivier Mahul & Charles J. Stutley, 2010. "Government Support to Agricultural Insurance : Challenges and Options for Developing Countries," World Bank Publications - Books, The World Bank Group, number 2432.
    6. Markus Goldstein & Christopher Udry, 2008. "The Profits of Power: Land Rights and Agricultural Investment in Ghana," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 981-1022, December.
    7. Foster, Andrew D & Rosenzweig, Mark R, 1995. "Learning by Doing and Learning from Others: Human Capital and Technical Change in Agriculture," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1176-1209, December.
    8. Gin, Xavier & Yang, Dean, 2009. "Insurance, credit, and technology adoption: Field experimental evidencefrom Malawi," Journal of Development Economics, Elsevier, vol. 89(1), pages 1-11, May.
    9. Damian Clarke & Joseph P. Romano & Michael Wolf, 2020. "The Romano–Wolf multiple-hypothesis correction in Stata," Stata Journal, StataCorp LP, vol. 20(4), pages 812-843, December.
    10. Adu-Gyamfi Poku & Regina Birner & Saurabh Gupta, 2018. "Why do maize farmers in Ghana have a limited choice of improved seed varieties? An assessment of the governance challenges in seed supply," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 10(1), pages 27-46, February.
    11. Pascaline Dupas & Jonathan Robinson, 2013. "Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 163-192, January.
    12. Tavneet Suri, 2011. "Selection and Comparative Advantage in Technology Adoption," Econometrica, Econometric Society, vol. 79(1), pages 159-209, January.
    13. Nathaniel Jensen & Christopher Barrett, 2017. "Agricultural Index Insurance for Development," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 39(2), pages 199-219.
    14. Brick, Kerri & Visser, Martine, 2015. "Risk preferences, technology adoption and insurance uptake: A framed experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 118(C), pages 383-396.
    15. Farrin, Katie & Miranda, Mario J., 2015. "A heterogeneous agent model of credit-linked index insurance and farm technology adoption," Journal of Development Economics, Elsevier, vol. 116(C), pages 199-211.
    16. Carter, Michael R. & Cheng, Lan & Sarris, Alexandros, 2016. "Where and how index insurance can boost the adoption of improved agricultural technologies," Journal of Development Economics, Elsevier, vol. 118(C), pages 59-71.
    17. Timothy G. Conley & Christopher R. Udry, 2010. "Learning about a New Technology: Pineapple in Ghana," American Economic Review, American Economic Association, vol. 100(1), pages 35-69, March.
    18. Alberto Abadie & Susan Athey & Guido W Imbens & Jeffrey M Wooldridge, 2023. "When Should You Adjust Standard Errors for Clustering?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 138(1), pages 1-35.
    19. Hongbin Cai & Yuyu Chen & Hanming Fang & Li-An Zhou, 2015. "The Effect of Microinsurance on Economic Activities: Evidence from a Randomized Field Experiment," The Review of Economics and Statistics, MIT Press, vol. 97(2), pages 287-300, May.
    20. Khushbu Mishra & Abdoul G. Sam & Gracious M. Diiro & Mario J. Miranda, 2020. "Gender and the dynamics of technology adoption: Empirical evidence from a household‐level panel data," Agricultural Economics, International Association of Agricultural Economists, vol. 51(6), pages 857-870, November.
    21. Flatnes, Jon Einar & Carter, Michael R., 2019. "A little skin in the game: Reducing moral hazard in joint liability lending through a mandatory collateral requirement," Journal of Economic Behavior & Organization, Elsevier, vol. 164(C), pages 199-214.
    22. Boucher, Stephen R. & Carter, Michael R. & Guirkinger, Catherine, 2008. "AJAE Appendix: Risk Rationing and Wealth Effects in Credit Markets: Theory and Implications for Agriculture Development," American Journal of Agricultural Economics APPENDICES, Agricultural and Applied Economics Association, vol. 90(2), pages 1-6.
    23. Lampe, Immanuel & Würtenberger, Daniel, 2020. "Loss aversion and the demand for index insurance," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 678-693.
    24. Khushbu Mishra & Richard A. Gallenstein, 2022. "Gender and Willingness to Pay for Insured Loans: Empirical Evidence from Ghana," Journal of Development Studies, Taylor & Francis Journals, vol. 58(12), pages 2526-2543, December.
    25. Stefan Dercon, 2002. "Income Risk, Coping Strategies, and Safety Nets," The World Bank Research Observer, World Bank, vol. 17(2), pages 141-166, September.
    26. Besley, T. & Case, A., 1994. "Diffusion as a Learning Process: Evidence from HYV Cotton," Papers 174, Princeton, Woodrow Wilson School - Development Studies.
    27. Abhijit V. Banerjee & Esther Duflo, 2007. "The Economic Lives of the Poor," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 141-168, Winter.
    28. Richard A. Gallenstein & Khushbu Mishra & Abdoul G. Sam & Mario J. Miranda, 2019. "Willingness to Pay for Insured Loans in Northern Ghana," Journal of Agricultural Economics, Wiley Blackwell, vol. 70(3), pages 640-662, September.
    29. Visser, Martine & Jumare, Hafsah & Brick, Kerri, 2020. "Risk preferences and poverty traps in the uptake of credit and insurance amongst small-scale farmers in South Africa," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 826-836.
    30. Rick S. Llewellyn & Brendan Brown, 2020. "Predicting Adoption of Innovations by Farmers: What is Different in Smallholder Agriculture?," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 42(1), pages 100-112, March.
    31. Udry, Christopher, 1990. "Credit Markets in Northern Nigeria: Credit as Insurance in a Rural Economy," The World Bank Economic Review, World Bank, vol. 4(3), pages 251-269, September.
    32. Morduch, Jonathan, 1999. "Between the State and the Market: Can Informal Insurance Patch the Safety Net?," The World Bank Research Observer, World Bank, vol. 14(2), pages 187-207, August.
    33. Khushbu Mishra & Richard A. Gallenstein & Mario J. Miranda & Abdoul G. Sam & Patricia Toledo & Francis Mulangu, 2021. "Insured Loans and Credit Access: Evidence from a Randomized Field Experiment in Northern Ghana," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(3), pages 923-943, May.
    34. repec:pri:rpdevs:besley_case_diffusion is not listed on IDEAS
    35. Ernest Aryeetey & Christopher Udry, 2010. "Creating Property Rights: Land Banks in Ghana," American Economic Review, American Economic Association, vol. 100(2), pages 130-134, May.
    36. Hazarika, Gautam & Alwang, Jeffrey, 2003. "Access to credit, plot size and cost inefficiency among smallholder tobacco cultivators in Malawi," Agricultural Economics, Blackwell, vol. 29(1), pages 99-109, July.
    37. Kassie, Menale & Shiferaw, Bekele & Muricho, Geoffrey, 2011. "Agricultural Technology, Crop Income, and Poverty Alleviation in Uganda," World Development, Elsevier, vol. 39(10), pages 1784-1795.
    38. Stephen R. Boucher & Michael R. Carter & Catherine Guirkinger, 2008. "Risk Rationing and Wealth Effects in Credit Markets: Theory and Implications for Agricultural Development," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(2), pages 409-423.
    39. Kenneth A. Baerenklau, 2005. "Toward an Understanding of Technology Adoption: Risk, Learning, and Neighborhood Effects," Land Economics, University of Wisconsin Press, vol. 81(1).
    40. Richard A. Gallenstein & Jon Einar Flatnes & John P. Dougherty & Abdoul G. Sam & Khushbu Mishra, 2021. "The impact of index‐insured loans on credit market participation and risk‐taking," Agricultural Economics, International Association of Agricultural Economists, vol. 52(1), pages 141-156, January.
    41. Cheryl Doss, 2006. "The Effects of Intrahousehold Property Ownership on Expenditure Patterns in Ghana," Journal of African Economies, Centre for the Study of African Economies, vol. 15(1), pages 149-180, March.
    42. Dean Karlan & Ed Kutsoati & Margaret McMillan & Chris Udry, 2011. "Crop Price Indemnified Loans for Farmers: A Pilot Experiment in Rural Ghana," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 78(1), pages 37-55, March.
    43. repec:pri:rpdevs:besley_case_diffusion.pdf is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Khushbu Mishra & Richard A. Gallenstein & Mario J. Miranda & Abdoul G. Sam & Patricia Toledo & Francis Mulangu, 2021. "Insured Loans and Credit Access: Evidence from a Randomized Field Experiment in Northern Ghana," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(3), pages 923-943, May.
    2. Mishra, K., 2018. "You are Approved! Insured Loans Improve Credit Access and Technology Adoption of Ghanaian Farmers," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277089, International Association of Agricultural Economists.
    3. Apurba Shee & Calum G. Turvey & Ana Marr, 2021. "Heterogeneous Demand and Supply for an Insurance‐linked Credit Product in Kenya: A Stated Choice Experiment Approach," Journal of Agricultural Economics, Wiley Blackwell, vol. 72(1), pages 244-267, February.
    4. Richard A. Gallenstein & Jon Einar Flatnes & John P. Dougherty & Abdoul G. Sam & Khushbu Mishra, 2021. "The impact of index‐insured loans on credit market participation and risk‐taking," Agricultural Economics, International Association of Agricultural Economists, vol. 52(1), pages 141-156, January.
    5. B Kelsey Jack, "undated". "Market Inefficiencies and the Adoption of Agricultural Technologies in Developing Countries," CID Working Papers 50, Center for International Development at Harvard University.
    6. Quentin Stoeffler & Michael Carter & Catherine Guirkinger & Wouter Gelade, 2022. "The Spillover Impact of Index Insurance on Agricultural Investment by Cotton Farmers in Burkina Faso," The World Bank Economic Review, World Bank, vol. 36(1), pages 114-140.
    7. Shukri Ahmed & Craig McIntosh & Alexandros Sarris, 2020. "The Impact of Commercial Rainfall Index Insurance: Experimental Evidence from Ethiopia," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(4), pages 1154-1176, August.
    8. Naranjo, María A. & Pieters, Janneke & Alpízar, Francisco, 2019. "Credit, insurance and farmers’ liability: Evidence from a lab in the field experiment with coffee farmers in Costa Rica," Journal of Economic Behavior & Organization, Elsevier, vol. 166(C), pages 12-27.
    9. Kenneth W. Sibiko & Matin Qaim, 2020. "Weather index insurance, agricultural input use, and crop productivity in Kenya," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 12(1), pages 151-167, February.
    10. Paulina Oliva & B. Kelsey Jack & Samuel Bell & Elizabeth Mettetal & Christopher Severen, 2020. "Technology Adoption under Uncertainty: Take-Up and Subsequent Investment in Zambia," The Review of Economics and Statistics, MIT Press, vol. 102(3), pages 617-632, July.
    11. Goundan, Anatole & Faye, Amy & Henning, Christian H. C. A. & Collins-Sowah, Peron A., 2020. "Investing in risky inputs in Senegal: Implications for farm profit and food production," Working Papers of Agricultural Policy WP2020-07, University of Kiel, Department of Agricultural Economics, Chair of Agricultural Policy.
    12. Alain de Janvry & Elisabeth Sadoulet, 2019. "Transforming developing country agriculture: Removing adoption constraints and promoting inclusive value chain development," Working Papers hal-02287668, HAL.
    13. Khushbu Mishra & Abdoul G. Sam & Gracious M. Diiro & Mario J. Miranda, 2020. "Gender and the dynamics of technology adoption: Empirical evidence from a household‐level panel data," Agricultural Economics, International Association of Agricultural Economists, vol. 51(6), pages 857-870, November.
    14. de Janvry, Alain & Sadoulet, Elisabeth, 2020. "Using agriculture for development: Supply- and demand-side approaches," World Development, Elsevier, vol. 133(C).
    15. Michelson, Hope & Fairbairn, Anna & Ellison, Brenna & Maertens, Annemie & Manyong, Victor, 2021. "Misperceived quality: Fertilizer in Tanzania," Journal of Development Economics, Elsevier, vol. 148(C).
    16. Stoeffler, Quentin & Opuz, Gülce, 2022. "Price, information and product quality: Explaining index insurance demand in Burkina Faso," Food Policy, Elsevier, vol. 108(C).
    17. Belissa, Temesgen & Bulte, Erwin & Cecchi, Francesco & Gangopadhyay, Shubhashis & Lensink, Robert, 2019. "Liquidity constraints, informal institutions, and the adoption of weather insurance: A randomized controlled Trial in Ethiopia," Journal of Development Economics, Elsevier, vol. 140(C), pages 269-278.
    18. Temesgen Belissa & Robert Lensink & Anne Winkel, 2020. "Effects of Index Insurance on Demand and Supply of Credit: Evidence from Ethiopia," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(5), pages 1511-1531, October.
    19. Michael R. CARTER & Alain de JANVRY & Elisabeth SADOULET & Alexandros SARRIS, 2014. "Index-based weather insurance for developing countries: A review of evidence and a set of propositions for up-scaling," Working Papers P111, FERDI.
    20. Keiko Fukumori & Ayumi Arai & Tomoya Matsumoto, 2022. "Risk Management for Smallholder Farmers: An Empirical Study on the Adoption of Weather-Index Crop Insurance in Rural Kenya," Working Papers 230, JICA Research Institute.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:agecon:v:54:y:2023:i:6:p:778-792. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/iaaeeea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.