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Heterogeneous Demand and Supply for an Insurance-Linked Credit Product in Kenya: A Stated Choice Experiment Approach

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  • Shee, Apurba
  • Turvey, Calum G.
  • Marr, Ana

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.
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  • Shee, Apurba & Turvey, Calum G. & Marr, Ana, 2019. "Heterogeneous Demand and Supply for an Insurance-Linked Credit Product in Kenya: A Stated Choice Experiment Approach," 2019 Annual Meeting, July 21-23, Atlanta, Georgia 291022, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea19:291022
    DOI: 10.22004/ag.econ.291022
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    4. Qingyin Cai & Yulian Ding & Calum Tuvey & Yuehua Zhang, 2021. "The influence of past experience on farmers’ preferences for hog insurance products: a natural experiment and choice experiment in China," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 46(3), pages 399-421, July.

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    Keywords

    International Development;

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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