Overview

Risk reduction remains a major challenge in increasing productivity and enhancing livelihoods among smallholders in developing countries. Index-based weather insurance offers a new promise for this purpose. Yet, individual uptake has been disappointingly low. We explore in this project the possibility of offering hybrid contracts at the level of coffee cooperatives and individual members in Guatemala and possibly Colombia. Interlinked transactions among members and ownership of collective assets suggest that group insurance can provide benefits in excess of the sum of benefits from individual contracts. Expressions of interest have been received from Fedecocagua in Guatemala and the National Federation of Coffee Growers in Colombia, and private insurance providers have been identified. Extensive prior work in Guatemala gives us a unique data base on which to construct the experiment, including a proposed baseline cooperative survey to be done in the Fall 2010. Randomized control experiments will be used to test the relative merits of group versus individual contracts, to offer a menu of contracts from which cooperatives and individuals can choose, and to explore different ways of promoting use of the product. The seed grant will be used to construct the details of a long term research project with these objectives.