Downscaling, Upgrading or Linking? Ways to Realize Micro‐Insurance

Micro‐insurance is seen by many as a promising tool to improve the social protection of low‐income earners. This assumption is supported by the positive experience of existing micro‐insurance schemes. At the same time, however, many schemes have failed to organize sustainable insurance arrangements that are affordable for the poor and near‐poor. The question is thus which institutions are best able to arrange for micro‐insurance. Formal institutions such as public agencies or commercial companies are usually too distant in social and spatial terms from the target group of micro‐insurance and face severe difficulties in downscaling. Informal institutions, however, such as self‐help groups or grassroots NGOs, usually lack the know‐how, experience and capacities to design and manage insurance arrangements. They need powerful partners to upgrade. An alternative would be that formal and informal institutions cooperate in providing micro‐insurance. This article argues that such a linking approach is superior to both the downscaling and upgrading approach.