Paper: Designed for Development Impact: Next Generation Approaches to Index Insurance for Smallholder Farmers

Decades of research and observation have demonstrated that risk is economically costly in low-income agricultural economies, prompting protective self-insurance strategies that keep small farmers poor as they eschew remunerative, but risky opportunities. Making matters worse, self and community-based insurance strategies are at best only partially effective, leaving small farm households to costly ex post coping mechanisms that compromise the human capital of the next generation. These problems are further compounded because risk itself stunts the development of rural financial markets, making it that much harder for small farmers to capitalize and move forward with new technologies and market opportunities.