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This study will evaluate an intervention based on rainfall index insurance product for urban migrants in Ouagadougou who have rural relatives engaged in agriculture.
Rural households in Burkina Faso face considerable weather-related risks. Yet less than 2 per cent rely on formal insurance (Burkinabe Ministry of Agriculture survey, 2015). A recurring problem with weather insurance is its low uptake, which has been attributed to cash constraints, lack of product understanding, and lack of trust in the insurance provider. This study will evaluate an innovative solution to this problem that markets rainfall index insurance urban migrants with rural relatives engaged in rain-fed agriculture. The evaluation will help answer the question whether this alternative marketing strategy is effective and viable.
- How does the uptake rate of rainfall index insurance among urban migrants compare with that of rural farmers? How do the respective uptake rates evolve over time?
- How does the uptake of rainfall index insurance by urban migrants affect agricultural investments, production choices and consumption smoothing of their rural relatives? How does this compare with the effects of insurance uptake by rural farmers?
- How does the uptake of rainfall index insurance by urban migrants affect their economic decisions, including transfers between urban migrants and rural relatives?
The intervention is based on an existing rainfall index insurance product developed by PlaNet Guarantee for small-scale rural farmers. The intervention will involve marketing the product to rural farmers and to urban migrants in Ouagadougou who originate from nearby villages and have relatives engaged in farming. Rural farmers receive the offer to purchase insurance for their own household, while urban migrants will be given the option to purchase insurance for agricultural plots farmed by their rural relatives, with the contract specifying indemnity payments to be paid either to the subscriber or directly to their rural relative.
Theory of change
The intervention theory of change is based on the existence of urban-rural linkages. In the formative phase, the research team found that it is common for rural households to have an urban-based relative from who they receive regular transfers. For urban migrants who provide assistance to their rural families in times of need, access to rainfall index insurance will reduce their risk burden, and thus allow them to pursue more profitable economic opportunities. Rural farmers who obtain access to formal insurance via their urban relatives will be able to smooth consumption more effectively. In addition, they will be encouraged to make farming and investment decisions that involve more risk but entail higher expected profits. When urban migrants subscribe to the proposed insurance product, this would also provide rural farmers indirect experience with formal insurance. The hypothesis is that this experience can help rural farmers improve their understanding of formal insurance, trust in formal insurance providers and, in the long run, improve direct uptake by rural farmers.
The evaluation exercise exploits the random assignment of rural households and their migrant relatives to treatment and control groups. First, villages will be randomised into a treatment group where the rainfall insurance product will be marketed and a control group where it will not. Ouagadougou-based migrants from both treatment and control villages will then be randomly assigned to two groups. The first migrant group will receive offers to purchase the insurance product to cover their rural relatives but the second migrant group will not. The study will conduct two rounds of primary data collection, baseline and endline, and one phone-based midline survey, with 80 villages and a randomly sampled 20 households per village. A standard difference-in-differences (DID) framework, combining baseline, midline and endline data will be used to estimate programme effects.