Microfinance Horizon

Author(s): Hongbin Cai, Yuyu Chen, Hanming Fang, Li-An Zhou

Abstract:

Lack of access to formal insurance market may prevent farmers from pursuing risky production activities with potentially large returns. How does access to formal microinsurance affect production and economic development? We report results from a large randomized natural field experiment conducted in southwestern China in the context of insurance for sows. We find that providing access to formal insurance significantly increases farmers’ tendency to raise sows. We also find some evidence that lack of trust on the government sponsored insurance policies is an important impediment to farmers’ willingness to purchase the formal insurance.

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