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

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

Shee, Apurba ORCID: 0000-0002-1836-9637, Turvey, Calum G. and Marr, Ana ORCID: 0000-0002-8764-5682 (2020) Heterogeneous demand and supply for an insurance-linked credit product in Kenya: A stated choice experiment approach. Journal of Agricultural Economics, 72 (1). pp. 244-267. ISSN 0021-857X (Print), 1477-9552 (Online) (doi:https://doi.org/10.1111/1477-9552.12401)

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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.

Item Type: Article
Additional Information: © 2020 The Authors. Journal of Agricultural Economics published by John Wiley & Sons Ltd on behalf of Agricultural Economics Society. This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
Uncontrolled Keywords: Insurance-linked credit, choice experiment, Kenya, random parameter logit, willingness to pay, maximum simulated likelihood, Bayesian estimation
Subjects: H Social Sciences > HG Finance
S Agriculture > S Agriculture (General)
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of International Business & Economics
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA)
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA) > Centre for Governance, Risk & Accountability (CGRA)
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA) > Greenwich Political Economy Research Centre (GPERC)
Last Modified: 07 Jan 2021 23:02
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
Selected for GREAT 2019: None
Selected for REF2021: REF 4
URI: http://gala.gre.ac.uk/id/eprint/29186

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