Access to financial services
is challenging for small farmers in developing countries. This paper studies
the demand for micro-insurance when it is bundled with micro-credit in the
context of rain-fed agriculture. It presents the conditions under which linking
micro-insurance with micro-credit can be beneficial for small producers who
cannot access agricultural credit due to lack of collateral. The results show
that if crop insurance and agricultural loans are bundled, the demand for crop
insurance increases with the profitability of the investment made through the
agricultural credit, and it decreases with the level of collateral required
during the application for credit.
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