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Macroinsurance for Microenterprises : A Randomized Experiment in Post-Revolution Egypt / Groh, Matthew
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Groh, Matthew
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Access to Finance.
- Bankruptcy and Resolution of Financial Distress.
- Climate Change Economics.
- Debt Markets.
- Finance and Financial Sector Development.
- Insurance.
- Insurance Law.
- Law and Development.
- Macroeconomics and Economic Growth.
- Microenterprises.
- Political Instability.
- Private Sector Development.
- Risk.
- Uncertainty.
- Local Subjects:
- Access to Finance.
- Bankruptcy and Resolution of Financial Distress.
- Climate Change Economics.
- Debt Markets.
- Finance and Financial Sector Development.
- Insurance.
- Insurance Law.
- Law and Development.
- Macroeconomics and Economic Growth.
- Microenterprises.
- Political Instability.
- Private Sector Development.
- Risk.
- Uncertainty.
- Physical Description:
- 1 online resource (38 pages)
- Other Title:
- Macroinsurance for Microenterprises
- Place of Publication:
- Washington, D.C., The World Bank, 2014
- System Details:
- data file
- Summary:
- Firms in many developing countries cite macroeconomic instability and political uncertainty as major constraints to their growth. Economic theory suggests uncertainty can cause firms to delay investments until uncertainty is resolved. A randomized experiment was conducted in post-revolution Egypt to measure the impact of insuring microenterprises against macroeconomic and political uncertainty. Demand for macroeconomic shock insurance was high; 36.7 percent of microentrepreneurs in the treatment group purchased insurance. However, purchasing insurance does not change the likelihood that a business takes a new loan, the size of the loan, or how the loan is invested. This lack of effect is attributed to microenterprises largely investing in inventories and raw materials rather than irreversible investments like equipment. These results suggest that, contrary to what some firms profess, macroeconomic and political risk is not inhibiting the investment behavior of microenterprises. However, insurance may still be of value to help firms cope with shocks when they do occur, but the paper is unable to examine this dimension, because the insurance product did not pay out over the course of the pilot.
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