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Heterogeneous demand and supply for an insurance-linked credit product in Kenya: A stated choice experiment approach

Author

Listed:
  • 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.

Suggested Citation

  • Shee, Apurba & Turvey, Calum G. & Marr, Ana, 2020. "Heterogeneous demand and supply for an insurance-linked credit product in Kenya: A stated choice experiment approach," Greenwich Papers in Political Economy 29186, University of Greenwich, Greenwich Political Economy Research Centre.
    • Handle: RePEc:gpe:wpaper:29186
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    File URL: http://gala.gre.ac.uk/id/eprint/29186/19/29186%20MARR_Heterogeneous_Demand_and_Supply_for_an_Insurance-Linked_Credit_Product_%28OA%29_2020.pdf
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    Cited by:

    1. Prakashan Chellattan Veettil & Yashodha Yashodha & Joseph Vecci, 2025. "Hypothetical bias and cognitive ability: Farmers' preference for crop insurance products†," American Journal of Agricultural Economics, John Wiley & Sons, vol. 107(3), pages 888-924, May.
    2. Yanling Peng & Yuansheng Jiang & Yu Hong, 2022. "Heterogeneous Preferences for Selecting Attributes of Farmland Management Right Mortgages in Western China: A Demand Perspective," Land, MDPI, vol. 11(8), pages 1-14, July.
    3. Peng, Yanling & Ren, Yanjun & Zhong, Yu & Jiang, Yuansheng, 2022. "Farmers’ Heterogeneous Preferences for Selecting Attributes of Farmland Management Right Mortgages: Evidence from Western China," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322408, Agricultural and Applied Economics Association.
    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.
    5. Denis Charles & Magali Dumontet & Johanna Etner & Meglena Jeleva, 2024. "Behavioral drivers of individuals’ Term Life Insurance Demand: evidence from a Discrete Choice Experiment," Working Papers hal-04649103, HAL.
    6. Hong Fu & Yuehua Zhang & Yinuo An & Li Zhou & Yanling Peng & Rong Kong & Calum G. Turvey, 2022. "Subjective and objective risk perceptions and the willingness to pay for agricultural insurance: evidence from an in-the-field choice experiment in rural China," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 47(1), pages 98-121, March.

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    Keywords

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    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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