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Insured Loans and Credit Access: Evidence from a Randomized Field Experiment in Northern Ghana

Author

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

Abstract

We conducted a two‐treatment randomized control trial in northern Ghana to investigate how bundling index insurance with agricultural loans affects smallholder access to credit. In one treatment, farmer groups were invited to apply for production loans bundled with an index insurance contract that, in the event of a drought, indemnifies farmers directly (micro‐insured loans). In the second treatment, farmer groups were invited to apply for production loans bundled with an index insurance contract that, in the event of a drought, indemnifies the lender on the condition that the indemnity be used to retire the farmer's debt obligation (meso‐insured loans). Farmer groups in the control category were invited to apply for uninsured loans. We find that insured loans increase farmers' likelihood of receiving credit by between 15 and 21 percentage points. Exploring the mechanisms of this effect, we find no impact on the likelihood that farmers apply for credit but do find an increase in the likelihood of loan approvals of between 17 and 25 percentage points.

Suggested Citation

  • 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.
    • Handle: RePEc:wly:ajagec:v:103:y:2021:i:3:p:923-943
    DOI: 10.1111/ajae.12136
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    References listed on IDEAS

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    2. Mekdim D. Regassa & Mohammed B. Degnet & Mequanint B. Melesse, 2023. "Access to credit and heterogeneous effects on agricultural technology adoption: Evidence from large rural surveys in Ethiopia," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 71(2), pages 231-253, June.
    3. 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.
    4. Ella Kirchner & Oliver Musshoff, 2024. "Digital opportunities for the distribution of index‐based microinsurance: Evidence from a discrete choice experiment in Mali," Journal of Agricultural Economics, Wiley Blackwell, vol. 75(2), pages 794-815, June.

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