MICROFINANCE PUBLICATION ROUND-UP: Free-riding vs Group Insurance; “Responsible” Microfinance Pricing; State of Microinsurance

“The Social Dilemma of Microinsurance: Free-riding in a Framed Field Experiment;” by Wendy Janssens and Berber Kramer; published by Elsevier; March 2016; 15 pages; available at:

This paper analyzes the incentives for individuals to buy health microinsurance while active in borrowing groups. Health issues are consistently among the top reasons people become unable to repay loans. However, when borrowing as part of a solidarity group, the burden to repay falls on the group if the individual cannot do so. This reduces the incentive for the individual to purchase insurance. After conducting a field experiment with credit groups in Tanzania, the authors found that group insurance is a potential remedy for this “free-riding.”

Those deemed more risk averse usually chose to buy insurance whether it was individual or group insurance and regardless the number of free-riders in their group. Among those deemed less risk averse, however, 46 percent were willing to buy individual insurance compared with 85 percent choosing group insurance [1].

“Responsible Pricing: Field Evidence;” published by MicroFinanza Rating; June 2017; 3 pages; available at:

When pricing their products, financial service providers (FSPs) have to balance profitability with keeping prices affordable to their customers. The key variables through which companies can control pricing are profit and operational efficiency. In this paper, MicroFinanza Rating argues that FSPs often fail to communicate their pricing to customers adequately. The authors also find significant room for improvement in the ways FSPs train their employees as well as document and monitor procedures. [2]

“The State of Microinsurance. The Insider’s Guide to Understanding the Sector;” edited by Jenny Glaesener Nasr et al; published by the Microinsurance Network; 2017; 68 pages; available at:

The theme of this report is climate change and how climate risks can be mitigated in developing countries. For example, Lisa Sherk and Lado Jobava examine the Climate Insurance Fund, which was launched in 2015 by the German development institution Kreditanstalt für Wiederaufbau. Mathieu Dubreil and Arianna Tabegna analyze the R4 Rural Resilience Initiative, which offers microinsurance in Senegal. Additionally, Pierre Casal Ribeiro discusses the insurance offered in Africa by the Agriculture and Climate Risk Enterprise (ACRE).

Jonathan Boudreau, Marie-Christine Bélanger and Rénald Levesque discuss the testing of area-yield index insurance with rice farmers in Mali. This kind of insurance is based on historical yield data. If a season’s yield in an area falls below a benchmark for similar areas, the insured farmers receive payouts. [3]

By Sascha Strobl, Research Associate

Sources and Additional Resources:

[1] http://www.sciencedirect.com/science/article/pii/S0167268116300166

[2] http://www.microfinanzarating.com/images/MFRInsight_ResponsiblePricing_June2017_Final.pdf

[3] http://www.microinsurancenetwork.org/sites/default/files/-State%20of%20Microinsurance%202017_Microinsurance%20Network.pdf

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