Insuring farmers through credit: Linking smallholders to financial markets with bundled products in Kenya

Publication Details

3ie Funded Evaluation TW13.1022.  A link to the completed study will appear here when available.

Sarah Janzen, Nicholas Magnan, Conner Mullally , Karl Hughes, Judith Oduol
Institutional affiliations
Montana State University, University of Georgia, University of Florida, World Agroforestry Centre
Grant-holding institution
Kansas State University
Sub-Saharan Africa (includes East and West Africa)
Agriculture and Rural Development
None specified
Gender analysis
None specified
Gender analysis
Equity Focus
Evaluation design
Randomised Control Trials (RCT)
Ongoing 3ie Funded Studies
3ie Funding Window
Agricultural Insurance Thematic Window


This study will evaluate the demand for and the effects of loans backed by lender-level index insurance on economic and psychological well-being among smallholder farmers in Kenya.


Given the low uptake of insurance, new risk mitigating financial products are being tested globally. Initial evidence has been encouraging though far from conclusive. This study will examine a product offered by Acre Africa that bundles loans backed by insurance offered to farmers in Kenya thus insuring farmers while increasing their access to agricultural loans.

Research questions

  1. What is the uptake rate of insurance-backed loans?
  2. Does an insurance-backed loan increase investment in production?
  3. Does an insurance-backed loan increase revenue, profit, and psychological well-being?


Intervention design

The intervention will offer digital loans backed by lender-level index insurance provided by Acre Africa, a private insurer. Insurance-backed loans do not require repayment if the index strike point is met. Additionally, TransUnion, a credit reporting agency will develop credit scores for farmers based on which Acre Africa will identify eligible farmers.

Theory of change

Insurance-backed loans will be attractive to farmers for two reasons. First, they will be less risky than uninsured loans because farmers do not pay the lender back if the insurance strike point is met. Second, they can be offered at lower interest rates because lenders are protected from weather-induced default. Thus, the demand for insurance-backed loans could be higher compared to traditional loans or insurance. Insurance-backed loans have the potential to provide insurance coverage to farmers who otherwise would not purchase it while protecting lenders against farmer default, increasing their ability and willingness to lend to smallholders. In addition to protecting farmers from weather risk, insurance-backed loans could also increase their ability to invest by giving them access to credit they might otherwise not have.

Evaluation design

This study will use a cluster-randomised design to estimate causal impacts. Clusters, defined by school localities, will be randomly assigned to three treatment groups and one control group. Farmers in one treatment group will be offered the insurance-backed agricultural loan. Farmers in the second treatment group will be offered the standard loan without insurance backing. Farmers in the third treatment group will be offered stand-alone insurance. Farmers in the control group will be offered nothing. The study will include 1250 farmers in each treatment arm with ten farmers in every cluster. It will estimate intent to treat effects (the effect of being offered a loan, irrespective of uptake) and treatment effects on the treated.

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