metadata: authors: 0: author: Delavallade,Clara Anne
1: author: Dizon,Felipe Jr Fadullon
2: author: Hill, Ruth Vargas
3: author: Petraud, Jean Paul
count: Africa,Burkina Faso,Senegal
docna: 0: docna: Managing risk with insurance and savings :
            experimental evidence for male and female farm managers in
            the Sahel
docty: Policy Research Working Paper
subtopic: Health Care Services Industry,Agricultural Economics,Nutrition,Gender and Development,Food Security,Natural Disasters
teratopic: Poverty Reduction,Urban Development,Finance and Financial Sector Development,Private Sector Development
abstracts: cdata!: Although there is fast-growing policy
            interest in offering financial products to help rural
            households manage risk, the literature is still scant as to
            which products are the most effective. This paper uses a
            randomized field experiment in Senegal and Burkina Faso to
            compare male and female farmers who are offered index-based
            agricultural insurance with those who are offered a variety
            of savings instruments. The paper finds that female farm
            managers were less likely to purchase agricultural insurance
            and more likely to invest in savings for emergencies, even
            controlling for access to informal insurance and differences
            in crop choice. It is hypothesized that this finding results
            from the fact that, although men and women are equally
            exposed to yield risk, women face additional sources of
            lifecycle risk -- particularly health risks associated with
            fertility and childcare -- that men do not. In essence, the
            basis risk associated with agricultural insurance products
            is higher for women. Purchasing insurance increased input
            spending and use more than savings. Those who purchased more
            insurance realized higher average yields and were better
            able to manage food insecurity and shocks. This finding
            suggests that gender differences in demand for financial
            products can have an impact on productivity, resilience, and welfare.
geo_reg_key: 1927320,517191
repnme: repnme: Managing risk with insurance and savings :
            experimental evidence for male and female farm managers in
            the Sahel
display_title: Managing risk with insurance and
            savings : experimental evidence for male and female farm
            managers in the Sahel
listing_relative_url: /research/2015/01/23856332/managing-risk-insurance-savings-experimental-evidence-male-female-farm-managers-sahel
topicv3: Food Security m1326439 199,Responsible Agricultural Investment
            m1327121 1963,Gender m1327621 615,Drought m1503313 3162,Health m1504661 3480
publishtoextweb_dt: 2015-01-01T00:00:00Z
historic_topic: Poverty Reduction,Urban Development,Finance and Financial Sector Development,Private Sector Development
no_of_pages: 29
author_keys: 0: author_key: 1594950
1: author_key: 1501623
model_extractions: WPS7176 Policy Research Working Paper 7176 Managing Risk with Insurance and Savings Experimental Evidence for Male and Female Farm Managers in the Sahel _Clara Delavallade Felipe Dizon Ruth Vargas Hill Jean Paul Petraud_ Poverty Global Practice Group January 2015
Policy Research Working Paper 7176

# **Abstract**

Although there is fast-growing policy interest in offering financial products to help rural households manage risk, the literature is still scant as to which products are the most effective. This paper uses a randomized field experiment in Senegal and Burkina Faso to compare male and female farmers who are offered index-based agricultural insurance with those who are offered a variety of savings instruments. The paper finds that female farm managers were less likely to purchase agricultural insurance and more likely to invest in savings for emergencies, even controlling for access to informal insurance and differences in crop choice. It is hypothesized that this finding results from the fact that, although men and women are equally exposed to yield risk, women face additional sources of lifecycle risk—particularly health risks associated with fertility and childcare—that men do not. In essence, the basis risk associated with agricultural insurance products is higher for women. Purchasing insurance increased input spending and use more than savings. Those who purchased more insurance realized higher average yields and were better able to manage food insecurity and shocks. This finding suggests that gender differences in demand for financial products can have an impact on productivity, resilience, and welfare.

This paper is a product of the Poverty Global Practice Group. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The authors may be contacted atrhill@worldbank.org.

_The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent._ Produced by the Research Support Team
# **Managing Risk with Insurance and Savings: Experimental Evidence for Male and Female Farm Managers in the Sahel**

Clara Delavallade, IFPRI Felipe Dizon, University of California, Davis Ruth Vargas Hill, IFPRI and the World Bank Jean Paul Petraud, University of California, Davis<sup>1</sup> JEL classification: O12 Keywords: risk, insurance, savings, gender

> 1 We thank CGIAR Research Program on Policies, Institutions, and Markets for funding this work and the Poverty Reduction and Economic Management network in the Africa Region and the World Bank for additional financing and the suggestion to undertake this work. This study was funded by the Regional Studies Program of the Chief Economist of the Africa Region. Many thanks also to IPA Burkina Faso and Planet Guarantee for helpful field collaboration.
# **1.** **<u>Introduction</u>**

Individuals in developing countries are subject to a multitude of hazards: from covariant shocks, such as droughts, to idiosyncratic shocks, such as falling sick. In West Africa, almost every rural household manages farmland and is exposed to the risk of unpredictable rainfall (Karlan et al. 2014). A wealth of empirical evidence has shown that households are unable to fully insure against such shocks (e.g. Townsend 1994) and the inability to protect their consumption and investment choices from these risks has important long-run welfare implications (Dercon 2004, Alderman, Hoddinott and Kinsey 2006). In this environment of uninsured risk, households often eschew investment opportunities with uncertain returns even if on average their returns are high (Morduch 1990, Walker and Ryan 1990, Dercon and Christiaensen 2011).

Improving the ability of rural household to manage these risks has the potential to substantially improve farmers’ welfare. A variety of financial instruments can help for specific needs and it is likely that an efficient risk management strategy will use a combination of financial products to allow households to manage the multiple shocks they experience. For example, weather insurance is an innovative financial product and can help rural households manage the impact of widespread drought, but will not help a farmer manage losses localized to his fields. Improved access to savings accounts could allow households to quickly respond to unexpected illness, but will have little value in helping households manage large or repeated shocks.

A considerable literature has emerged in recent years that examines the demand for and impact of financial instruments that can help households manage risk. Cole et al. (2013), Karlan et al. (2014), Dercon et al. (2014), and Mobarak and Rosenzweig (2013) assess whether weather index insurance can help households manage uninsured drought risk in India and Sub-Saharan Africa. Dupas and Robinson (2013) assess whether easy access to savings accounts can help Ugandan women manage health risk. Thornton et al. (2012), Dercon et al. (2011) and Delavallade (2014) assess demand for and retention of health microinsurance products among the poor. In sum, each instrument has merits, if implemented correctly, in helping the poor manage risk.

In this paper, we contribute to this literature by providing estimates from field experiments in Burkina Faso and Senegal of the impact of weather insurance and three types of savings on a variety of investment and welfare outcomes. By randomizing the provision of four different financial products, we compare the effectiveness of different types of instruments in achieving welfare gains. The specific focus of the paper is on financial products that encourage investments in agriculture. We assess whether weather insurance is more or less effective than emergency savings in allowing individuals to manage risk. Karlan et al. (2014) also compares the effectiveness of insurance versus direct cash payments in increasing agricultural investment. However, in our study we explicitly compare different savings instruments with insurance. This is akin to Dupas and Robinson (2013), who investigate the impact of four types of targeted health savings instruments with various commitment levels, whereas the focus of this paper is savings in the context of agricultural investments and shocks instead of health.

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The experiment was designed to test how demand for insurance and savings varies with gender. This was done by randomizing the offer of financial instruments to a selected individual within a household. We contend that this is important in the Sahel as---as in much of the developing world—women and men have quite distinct spheres of activity and the risks they face are different as a result. Specifically, women are exposed to much greater physical risk through their child-bearing years than are men and they are more involved in caring for children than are men. As a result, although drought risk affects men and women equally, women appear less immediately concerned than men about drought and more vulnerable to health-related shocks to them and their children. This is perhaps especially the case in parts of rural Sahel where fertility rates are still particularly high.

In 40 experimental sessions conducted in Burkina Faso and Senegal prior to the onset of the planting season, 800 farmers and ROSCA members were endowed with $12 (the cost of half a bag of fertilizer) and randomly offered one of four products, at an exogenously determined price or interest rate. One instrument was a weather index insurance that was being sold in both countries by local insurance companies sponsored by an international NGO. The other three instruments were savings devices: one was an encouragement to save for agricultural inputs at home through labeling, a second was a savings account for emergencies that was managed by the local group treasurer (either a ROSCA or a farmer’s group to which the individual belonged), and a third was a savings account for agricultural input investments that was managed by the same treasurer. The field experiment was conducted in Senegal and Burkina Faso at the same time to allow us to begin to assess the external validity of our results within the Sahel.

Our findings are consistent with the conjecture that men and women face different risks. We find much stronger demand for weather insurance among men than among women, and stronger demand for emergency savings among women. This is not driven by access to informal insurance such as transfers, area cropped or types of crops grown. Our results are consistent with Dercon et al. (2014) who show that in the context of weather insurance, which covers only covariate risk, those who are more exposed to income risk that is uninsured in a weather contract (basis risk) are less likely to purchase the product. If women’s labor allocation is more affected by health shocks than men’s, then this would explain the gender differences we observe between the two groups.

We find that insurance was more effective at encouraging agricultural investment than savings. Those in the insurance treatment spent more on inputs and used more fertilizer than those in the savings treatments. In addition, the higher input use that insurance encouraged resulted in significantly higher yields. Although few differences in welfare outcomes were observed one month after the intervention, the insurance product offer resulted in better ability to manage risk among these farmers post-harvest.

All in all, our results suggest that different patterns of demand for financial products among men and women can result in welfare differences in the long-run. A further exploration of why these differences in demand arise is needed. In this paper we conjecture that it is as a result of the different nature of risks faced by men and women. If this is the case it would suggest that these differences need to inform how new financial products, such as index insurance products currently becoming more available, are designed to meet the needs of both men and women.

3
Our paper is one contribution to the emerging literature on the benefits and concerns of offering indexed agricultural insurance to rainfall dependent smallholder farmers in low income countries. This literature has documented the potential beneficial impact of these products and also concerns. Because these products provide insurance through an index rather than observed losses experienced on a farmer’s field, they can have substantial basis risk. Basis risk is the risk that the index differs from the loss. Index insurance typically insures just one source of risk to agricultural yields—local weather conditions— whereas in the contexts in which it is provided there are often many sources of risk such as pests, floods, and health shocks to agricultural labor. Theoretically it can be shown that basis risk depresses the value and demand for these products (Clarke 2011), and Dercon et al. (2013) and Rosenzweig and Mobarak (2013) provide empirical evidence consistent with the theory. In documenting both the beneficial impact of index insurance and further evidence consistent with the idea that basis risk does limit demand, this paper is one contribution to this broader literature.

Our results also contribute to the fast-growing literature on savings in developing countries. Dupas and Robinson (2013) argue that, for health-related targets, barriers to savings are better alleviated with savings devices with a light form of commitment offering more flexibility. Similarly, Karlan and Linden (2014) show weaker commitment devices, targeted at education, to be both preferred and more effective at reaching their investment objective. We also find that farmers preferred weaker commitment devices: saving was higher in products which were perceived to be more flexible. Commitment was valued by individuals in our sample--evidenced by the fact that the amounts of money spent on savings products were, on average, twice as high as those spent on insurance products (even when the interest rate was zero)—but farmers preferred savings products that they believed gave them more flexibility. Although smaller amounts were saved in savings instruments that were perceived to have higher commitment, these instruments were marginally more effective at encouraging agricultural investments when compared to the other savings products.

The following sections detail the experimental design (section 2), the sampling of participants and data collected (section 3), the empirical strategy (section 4) and the empirical results (section 5). Section 6 concludes.

# **2.** **<u>Experimental design</u>**

We undertook a controlled field experiment in order to characterize the demand for, and impact of, four financial products offered to individuals in rural Burkina Faso and Senegal. In a number of ways our field experiment looked quite like an experimental game. Participants were asked to attend an experimental session and were provided with a monetary endowment, which they were asked to use to make allocations into a financial product offered to them during the session. However, our field experiment departed from standard experimental games because the financial products and their payouts were real in the sense that they were offered by institutions outside of the “lab in the field” experiments and that the experimental time frame was set in the natural agricultural cycle. Another feature that bridged the “lab in the field” experiment with the agricultural cycle is that we facilitated an agricultural input fair in 4
each village at the time of planting, so that, instead of having varying market access costs, all our sample had same access to them to the extent of the value of the endowment we gave them.

The four financial products offered were as follows:

- **Insurance (T1)** : An index insurance product providing protection against too little rainfall for the main crop in the area (groundnuts in Senegal, maize in Burkina Faso). In Senegal the index was a weather-based index whilst in Burkina Faso the index was an NDVI based index. In both countries the index-insurance product was a product that was being sold by local insurance companies with the support of Planet Guarantee. Modifications were made to the weather product in Senegal to make it simpler to explain in a short experimental session, and in both countries the price of the insurance product was varied randomly across experimental sessions.

- **Agricultural investment savings at home (T2)** : Saving for agricultural input purchases. Savings were earmarked through placing them in an envelope which was then sealed and stamped with the purpose of the savings stated on the front. The envelope would be kept at home by the participant and there was nothing, other than the earmarking, that prevented them from using the savings for other purposes.

- **Agricultural investment savings with the group treasurer (T3)** : As in T2, these saving were earmarked for agricultural input purchases. However in this treatment savings were not kept at home by the participant, but rather they were managed by the treasurer of the ROSCA or farmers group to which the participant belonged. To withdraw from the savings, the participant would have to go through this same treasurer. They had to take their savings passbook to the treasurer who recorded the amount withdrawn and purpose of the withdrawal. Both the participant and the treasurer signed the record of the transaction. The treasurer was asked to enquire of the participant what the reason for the withdrawal was. Interest on savings still held after one month was paid. The interest rate was varied across experimental sessions.

- **Emergency savings with the group treasurer (T4)** : This savings has the same commitment level as T3, but is earmarked for emergency expenses. Again, in this treatment savings were managed by the treasurer of the ROSCA or farmers group to which the participant belonged. The withdrawal procedure was identical to the savings for input with the treasurer (T2) and the interests were also paid on savings held after one month. The interest rate was varied across experimental sessions. In addition after one month, individuals in this treatment group were given the option to continue the same arrangement for another three months until harvest time at the same interest rate (T4+). However, this was not made known to the participants until one month after the session.

All four products offered were products that were available in the study area and are thus products that are indeed financial services that can be feasibly made available to households. The insurance products offered in Senegal and Burkina Faso were actual insurance products offered by local insurance 5
companies in collaboration with Planet Guarantee. Local ROSCAs already provide a form of savings to members and in the Oxfam project “Savings for Change” implemented in Senegal and Burkina Faso (and many other countries in the region) these groups are strengthened and encouraged to provide insurance to members and financing for investment (Beaman et al. 2014). The envelopes are akin to commitment savings boxes that have been implemented in a number of settings.

The three saving products can be evaluated and compared as commitment devices. A financial product that requires commitment is one where reversal of the investment decision is costly. This cost is an early withdrawal penalty, a physical barrier or a combination of both. The weakest commitment device is with the envelope (T2), in which reversal inflicts only a small psychological cost (revision of commitment, tearing up and opening the envelope). For the group savings, reversal is psychologically more costly and it also involves a physical and monetary penalty. The psychological cost is higher than that of the T2 home savings because a “reverser” needs to explain their decision to somebody outside the household. Furthermore, there is a physical cost because one needs to seek out the treasurer in order to withdraw money from their account. Finally, there is a financial cost because no interest is paid on the money withdrawn before the one-month term.

The four products are designed to help individuals better manage risk and/or to undertake agricultural investments with an uncertain but potentially high return. As shown in Table 1, T1 and T4 address risk whilst T2 and T3 encourage agricultural investments. Although both T1 and T4 are designed to help individuals manage risk, they are very different instruments focusing on very different types of risk. T1 addresses drought risk which is the main of many agricultural risks faced in the study sites, and carries with it basis risk (see Clarke 2011 for an explanation). T4 can be used for any type of emergency but is limited by its size to manage shocks with a smaller financial magnitude. The three experimental savings products offered various combinations of purpose and commitment. By assessing the impact of these products we can assess whether helping individuals manage risk is effective in encouraging investment in uncertain but high return activities and improving welfare. We will also assess whether savings or insurance are more effective at helping individuals manage risk, and whether high or low commitment savings products are more effective in encouraging investment.

Twenty participants were invited to each experimental session. On arrival participants were provided with a 6,000 CFA endowment (equal to about 12 USD).<sup>2</sup> All participants then participated in a joint information session in which discussions were held on the role of unexpected events in everyday life, a risk revelation exercise was undertaken (through the form of a Binswanger lottery described further in the following section), and information was provided about an agricultural input fair which would be held in one month’s time.

**Table 1: Financial product features**

|**Risk or investment**|**Type of risk product**|**Type of savings product**|
|---|---|---|

2 This show up fee was more than enough to cover their time in the experimental session, and was equal to the cost of half a bag of fertilizer.

6
|**Insurance (T1)**|Risk|Insurance to address<br>agricultural risk||
|---|---|---|---|
|**Agricultural savings at home**<br>**(T2)**|Pre-specified<br>agricultural investment||Low commitment (sealed<br>envelope kept by self)|
|**Agricultural**<br>**investment**<br>**savings with the group (T3)**|Pre-specified<br>agricultural investment||High commitment (savings<br>kept with treasurer)|
|**Emergency savings with the**<br>**group (T4)**|Risk|Savings<br>to<br>address<br>many types of risk|High commitment (savings<br>kept with treasurer)|

After the joint information session, participants were randomly allocated to one of four groups – through a public lottery-- and they continued the experimental session with this group. In each randomly composed group, one of the four financial products was described to participants.

Once these products had been described, participants were asked to decide how much of their 6,000 FCFA endowment they wanted to take as cash and how much they wanted to put into the product that they had been offered. For logistical purposes they could only choose denominations of 500 FCFA to allocate to the financial instrument. Participants were offered the opportunity of asking questions to the experimenter for clarification. They were reminded that the decision was individual, that the product offered had both benefits and disadvantages and that their allocation choice was about what was good for them and their family.

Once participants were ready to make their decision they recorded their choice in private, transferred their allocation to the savings. They received a passbook for treatment 3 and 4, an insurance certificate for treatment 1 or the envelope if they were in treatment 2. At this point they also received payments for the choices they made in the risk and time preference experimental games as described further in the next section.

This approach was inspired by Hill and Robles (2011). The experimental sessions allowed us to control the information provided to participants, so as to ensure that identical general information was provided to all participants, and that the same exact setting (endowment, decision time) was in place for choices over all financial instruments. However, ensuring that the savings and insurance decisions made in the session had real impact on life outside of the session allows us to look at the impact of these products on behavior and welfare outcomes. It also allowed us to use farmers’ own subjective expectations about the probability distribution of weather and health outcomes, returns to agricultural investments rather than artificially specifying them in the parameters of the game. In addition it also allowed time preferences of participants and trust in insurance contracts and group treasurers to play more of a role in determining choices. These are all factors that are likely to be important in determining demand for different types of financial products. The limitation of this approach is that by endowing the individual with resources to 7
participate in the experiment, we abstract from liquidity constraints in our estimations of demand for these products.

One month after the original experimental session, a series of input fairs were held in each of the villages were sessions had been held. All participants were invited to the fair and, once at the fair, they were given the option of purchasing inputs. Participants in treatments 3 and 4 were provided with the remaining money that had been in savings with the group treasurer, and any interest that was due was paid. Participants in treatment 4 (savings for emergencies) were also offered the opportunity to save again with the group treasurer for further safe keeping over a three-month period, and at the same interest rate as they had been offered earlier (T4+). These interest payment were made in October, at the same time that insurance payouts were also due. Because of favorable weather conditions that year, no insurance payouts were made. Figure 1 below summarizes the project timeline.

**Figure 1: Project Timeline (2013)**

|June|Experimental sessions<br>Financial products offer|Baseline Survey|
|---|---|---|
|July|Input fair<br>Interest payment on agricultural investment and emergency<br>savings products (T3 and T4)|Midline survey|
|October|Insurance term<br>Interest payment on extended agricultural savings product (T4+)||
|December||Endline survey|

# **3.** **<u>Empirical approach</u>**

The random allocation of participants into these four treatment groups allows us to examine the welfare impact of each of these products by comparing the behavioral changes across groups. The provision of an endowment to each individual to spend on a product ensured that take-up was high across all products affording us with some power with which to assess differences in outcomes. The fact that the same endowment was offered across all groups to all individuals, allows us to estimate the differential impact of the type of financial product offered.

To increase power we also run LATE estimation models with take-up instrumented with the interest rate on savings, the price of insurance and the day on which the experimental session took place (this was also randomized and we expect subjective expectations about the probability distribution of yields to change as more information about the season becomes available over time).

In our analysis we specifically examine the following questions:

- **_The effectiveness of insurance versus targeted savings in encouraging productive investment and improving welfare:_** We compare agricultural investments between participants in T1 to those

8
in T2 and T3 to assess whether risk mitigation (T1) or targeted savings (T2 and T3) is more effective at boosting investment in productive assets, and encouraging welfare gains in the long-run. Karlan et al. (2014) suggest that investments in managing risk may be more effective at encouraging productive investment.

- **_The difference between saving for emergencies and saving for investment in affecting ability to manage risk and investment outcomes:_** We will compare participants in T3 and T4 to assess what is the impact of savings for emergencies (T4) rather than investments (T3) on investment in productive activities and ability to manage risk.

- **_The role of commitment in savings products in ensuring outcomes:_** By comparing outcomes between T2 and T3 we will look at the impact of high commitment (T3) over low commitment (T2) on investment in productive activities and ability to manage risk. By undertaking this comparison we will explore the question of what level of commitment is beneficial. As Dupas and Robinson (2013) note: “Since much of the value of a savings product appears to be in the mental labeling it facilitates, a product which does not severely limit liquidity is preferred to one that does, especially for people living in an environment in which income shocks are common, such as rural Kenya.” We therefore explore whether the earmarking product (T2) did raise more demand than the higher-commitment savings product (T3) and which of both had a higher impact on investment.

# **4.** **<u>Selection of participants and data</u>**

The experiment was conducted with 806 individuals in rural areas in the Departement de Kaffrine in Senegal and around Bobo-Dioulasso in Burkina Faso. Farmers groups were chosen where a vast majority of members, if not all, cultivated less than 6 hectares of land. ROSCAS had to hold regular meetings in order to be included in the sample. As shown in Table 2, 14 ROSCAS and 17 farmers’ groups participated in the study. The membership of ROSCAS in both countries was entirely female, whilst farmers groups were entirely male in Senegal and mixed in Burkina Faso.

Individuals participating in the experiment were members of the selected farmers’ groups and ROSCAs. Group leaders were systematically included in the study, the rest of the participants were selected randomly out of a list of other group members. We conducted 20 sessions with 20 individuals each in both countries. Not more than 40 individuals (two sessions) per group were included in the study in order to limit learning and spillovers. For that same reason, when one group was split into two sessions, the sessions were conducted on the same day.

**Table 2 - Sample Description**

||Senegal|Burkina<br>Faso|
|---|---|---|
|Panel A: Baseline Sample|||
|Total number of individuals surveyed at baseline|403|403|

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|Number of ROSCAS|7|7|
|---|---|---|
|Number of participants|200|203|
|_Percentage female (in %)_|_100_|_100_|
|Number of farmers' groups|9|8|
|Number of participants|203|200|
|_Percentage female (in %)_|_4.4_|_47.5_|
|Panel B: Endline|||
|Number of individuals in initial sample not found at endline|1|1|
|_Percentage of baseline sample (in %)_|_0.25_|_0.25_|
|Total number of individuals surveyed at endline|502|496|
|_Percentage female(in %)_|_50.60_|_71.98_|

Selected individuals were visited a few days prior to the first experimental session. The basic objective of the study was explained to the individual and he/she was told that participation would entail participating in a survey, attending a group meeting in which they would be given money and have the opportunity to choose how to use it, and participating in a survey after the end of harvest. They then indicated whether they wanted to participate in the study or not and if so the consent form was signed and the survey proceeded.

During the baseline survey questions on demographics, assets, expenditure on key categories of goods, agricultural production practices, sources of income, health status, recent shocks were asked, and baseline savings, loans and remittances data was collected. Surveys were conducted using PDAs in Senegal and using laptops in Burkina Faso. In addition each participant was asked whether he/she would like to receive a gift of 500 CFA at the meeting to which they had been invited on the following day or a gift of 550 CFA at another similar event to be held in one month. The participant was also asked whether he/she would like to receive a gift of 500 CFA at the meeting to be held in one month or a gift of 600 CFA to be held in three months at the end of the agricultural season. Their time preferences were recorded and the respondent was given an information voucher reminding them of the details of the experimental session to be held and what their choices in the time preference questions had been.

At the end of the experimental session the following day the participant received any gift he/she had elected to receive that day through the time preference questions. In addition, at the experiment the following day, each participant was also asked to participate in a standard Binswanger style lottery (Binswanger 1980) in order to measure risk attitudes before the main experiment as described in Section 2. Although individuals made choices in this risk lottery prior to participating in the rest of the experiment, the results of the risk game were not determined (i.e. the coin was not flipped) until the end of the experimental session after individuals had recorded their main experimental decision of how much to save or spend on insurance.

One month after the experimental sessions, all participants were revisited. As described in section 2 an input fair was held during which time respondents with savings with the group treasurer could withdraw the funds, and inputs were offered for sale. For all those that attended the input fair, we recorded the amount left in the savings product and the amount of agricultural inputs purchased during the fair. A short survey was conducted with all those that attended the fair after they had made their purchases and with 10
all other households during a household visit. The midline survey asked about expenditure on key categories of goods, savings, recent health experiences and food security.

Finally, after the end of the harvest a further survey was conducted on all who had previously been surveyed. This survey collected data on wellbeing, saving, some measures of consumption as well as yields and value of production.

Table 3 displays summary statistics of the main variables of interest as well as the p-value of the test that the means are equal for all four treatment groups. There are no significant differences across treatment groups.

Households of participants are large (with 9 and 14 members on average in Burkina Faso and Senegal respectively). Farming is the main source of income, although income from non-farm self-employment activities is quite high in Burkina Faso. The average land holding is 5 acres in Burkina Faso and 7 acres in Senegal. In each country about half of the participants were literate with levels of education slightly higher in Senegal.

Prior to our intervention agricultural insurance was not present in these villages and health insurance was also almost nonexistent. However, drought risk and ill-health are widespread. Almost a quarter of participants reported experiencing food shortages as a result of dry weather in the last year, 35% of participants had been sick themselves for more than 7 days or their spouses had been sick, and 25% of participants had children that had been seriously ill in the past three months.

Furthermore we see gender differences in exposure to risk. Men offered the insurance product are 12 percentage points more likely to report an agricultural shock occurring within the previous year than women in that group. However, women are concerned more often with the food security of their household than are men (Table 4). Together, this may suggest that women are more concerned with nonagricultural shocks to welfare.

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# **Table 3: Summary Statistics and balance checks**

||I|nsurance (<br>Stnd|T1)|Agricul|tural envel<br>Stnd|ope (T2)|Agricul|tural savin<br>Stnd|gs (T3)<br>Media|Emer|gency savin<br>Stnd|gs (T4)|Equality<br>of means|
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
||Mean|.<br>Dev.|Median|Mean|.<br>Dev.|Median|Mean|.<br>Dev.|n|Mean|.<br>Dev.|Median|p-value|
|**Panel A: Demographics and risk**||||||||||||||
|Male|0.37|0.48|0|0.40|0.49|0|0.37|0.48|0|0.35|0.48|0|0.09|
|Degree of food insecurity|2.58|2.10|3|2.49|2.02|3|2.50|2.03|3|2.55|2.03|3|0.95|
|Delay to buy medicine when ill (days)|1.84|7.51|0|1.41|3.56|0|6.89|71.12|0|1.09|1.87|0|0.12|
|Used savings to cope with most prevalent||||||||||||||
|shock|0.34|0.47|0|0.36|0.48|0|0.45|0.50|0|0.40|0.49|0|0.12|
|Amount saved at home (FCFA)|9,607|30,653|0|7,825|28,156|0|7,487|22,852|0|6,862|19,644|0|0.85|
|Amount in savings account (FCFA)|8,771|54,547|0|8,259|56,269|0|8,677|56,905|0|13,547|106,158|0|0.97|
|Amount contributed to group savings (FCFA)|1,889|9,745|0|1,621|5,863|0|2,749|12,142|0|2,879|19,282|0|0.53|
|Amount of monetary help received over 3<br>months(FCFA)|1,743|7,188|0|2,108|9,023|0|2,323|10,520|0|1,719|7,871|0|0.77|
|**Panel B: Farming**||||||||||||||
|Total area planted (ha)|6.59|5.37|5|6.93|5.29|6|6.81|6.11|5|6.66|6.09|5|0.89|
|Main crop is groundnut|0.30|0.46|0|0.29|0.46|0|0.27|0.44|0|0.28|0.45|0|0.85|
|Main crop is "petit mil"|0.20|0.40|0|0.24|0.43|0|0.29|0.45|0|0.23|0.42|0|0.34|
|Main crop is sorghum|0.09|0.29|0|0.06|0.25|0|0.09|0.29|0|0.10|0.30|0|0.52|
|Main crop is cotton|0.08|0.27|0|0.07|0.26|0|0.04|0.20|0|0.07|0.26|0|0.15|
|Total expenses on inputs (FCFA)|52,700|111,514|17,000|52,321|124,996|15,500|42,322|79,442|12,000|42,706|97,009|13,000|0.68|
|Quantity of fertilizer used (kg/ha)|83.54|137.90|46.06|76.42|160.15|35.71|73.69|131.39|34.52|62.99|118.93|33.33|0.47|
|Normalized output|0.04|0.89|-0.10|0.02|0.76|-0.12|-0.04|0.63|-0.13|-0.02|0.69|-0.11|0.54|

_Note: All treatment sample. P-value for the F test of equality of the means across four treatment groups._ 12
**Table 4: Gender differences in food security concerns at baseline**

||**Burkina Faso**|**Senegal**|
|---|---|---|
|Mean Women|1.78|2.28|
|Mean Men|1.52|2.15|
|T-test of difference|2.00**|1.64*|

How often were you concerned about your household's food security in the last month? 0=Never, 1=Occassionally (1 to 3 times), 2=Sometimes (3 to 10 times), 3=Often (10+ times)

# **5.** **<u>Results</u>**

## **5.1.Demand**

We first present in Figure 2 the frequency distribution of the amount invested in each financial device as well as summary statistics for the amount invested in Table 5. All individuals offered weather insurance (T1) and high-commitment investment savings (T3) invested a positive amount. Only one individual offered low-commitment investment savings (T2) did not invest and 4% of individuals did not invest in emergency savings (T4). Amounts invested were higher in Burkina Faso. It is possible that the high amounts invested are in part due to experimental conditions. Participants were offered a lump sum to be invested in part or fully and they decided to “play the game”. In line with the gift exchange theory (Falk, 2007), donating gifts leads recipients to reciprocate and make donations in return. In the context of our study, participants were not invited to make donations in return but they might have been willing to reciprocate the gift by investing the money they were offered in the products they were offered during the session.

**Figure 2 – Frequency of distribution of amount invested in financial product**

13
<!-- Start of picture text --> 60<br>40<br>=<br>oa<br>irsaoaa<br>20<br>0 1000 862000 83000 4000 5000 0<br>Amount invested in weather insurance<br><!-- End of picture text --> <!-- Start of picture text --> 60<br>40 ..<br>Oo<br>oo<br>rsaoaa<br>20<br>0 — 2000 — 4000 _ 6000 0<br>Amount invested in emergency savings<br><!-- End of picture text --> <!-- Start of picture text --> 40<br>30<br>a<br>20 53<br>2<br>10<br>0 2000 _ 4000 6000 0<br>Amount invested in envelape<br><!-- End of picture text --> <!-- Start of picture text --> 50<br>40<br>30<br>5=e<br>2<br>10<br>0 2000 4000 6000 0<br>Amount invested in agricultural investment savings<br><!-- End of picture text -->
than 1500 FCFA. Interestingly, the densities of distribution of the two investment savings are bi-modal, perhaps suggesting two target levels of savings for two different values of inputs. We will return to this idea of a savings target in the investment savings treatments later.

Preferences over the types of savings product vary across the two countries. In Burkina Faso, those in the emergency savings treatment chose to invest the most in savings. The amount invested in savings was lowest for those in the treatment in which they were offered the envelope for agricultural savings at home. In Senegal, however this was the most preferred savings option, and the amount saved was lowest for those in the emergency savings product.

In Table 6, we formally test the relationship between the amount invested in insurance and savings, and the type of contract offered. In addition to randomizing the type of savings device, the price of insurance and, where possible, the interest that accrued to savings were randomized. It was not possible to offer interest on the low-commitment savings held at home given we could not monitor how much was in the envelope over the course of the month. The interest rate of high-commitment investment savings and emergency savings, and the loading factor on the insurance contract (i.e. the ratio of the premium to the expected value of the insurance contract) were randomized at the village level. This allows us to assess the responsiveness of savings and insurance demand to price in Table 6 and Figure 3. The randomization of treatment was stratified by gender (by organizing women only and mainly-male sessions) and we also test the impact of gender of respondent on demand.

Columns (1) and (2) of table 6 examine demand for insurance. The first finding of note is that demand for insurance is significantly lower among female participants than among male participants. On average, men spent 570 FCFA more on insurance than female participants. This is almost 30% of the average spending on insurance, a significant and sizeable difference.

We explore a number of hypotheses as to why this difference occurs. A male preference for the insurance product could arise if men may be more engaged in agricultural production and/or more water-intensive crops, or that men and women have differential access to informal insurance. Surprisingly, while men offered the insurance product are 12 percentage points more likely to report an agricultural shock occurring within the previous year than women in that group, this does not significantly affect take-up of the insurance product nor of any savings product. Controlling for access to remittance income as a form of insurance does also not remove the gender difference. In addition, while men in the insurance treatment arm cultivate about 0.5 hectare more than women on average, the size of land cultivated does not significantly affect insurance or savings products take-up. Participants growing sorghum or cotton are significantly more likely to invest in the weather insurance product, but this is largely driven by differences between Senegal and Burkina Faso as few households in Senegal grow either crop. However, while controlling for the main crop cultivated does slightly reduce the size of the gender differential impact on take-up, this impact remains quite large.

We hypothesize that the difference arises because men and women are exposed to different risks in this environment. Whilst agricultural shocks affect the income sources of both men and women, women are in addition exposed to much higher health risk during pregnancy and child birth as a result of high fertility 15
rates, and as primary childcare givers are more exposed to the risk of ill health of their children. As a result the agricultural insurance product, in insuring only one of the risks they face to their income stream, poses larger basis risk to women than to men. As a result, the value, and thus demand, for this product is lower among women.

**Table 6: Determinants of amount insured and saved**

||(1)<br>Insurance|(2)<br>Insurance|(3)<br>Savings|(4)<br>Savings|(5)<br>Savings|(6)<br>Extended<br>savings|
|---|---|---|---|---|---|---|
|Male|570.66|472.79|-150.54|-137.55|-613.27|-13.55|
||[241.80]**|[200.39]**|[212.10]|[214.26]|[356.44]*|[355.00]|
|Burkina Faso|319.27|-1,268.25|847.97|1,584.40|1,557.92|166.83|
||[210.06]|[352.64]***|[209.29]***|[261.93]***|[266.06]***|[348.19]|
|Group leader|397.05|352.32|319.15|401.89|410.56|-273.63|
||[257.56]|[250.41]|[198.79]|[197.05]**|[195.57]**|[419.38]|
|Insurance discount|25.90|7.09|||||
||[39.19]|[32.22]|||||
|Day of offer|138.34<br>[37.90]***||||||
|Senegal*Day of offer||0.33<br>[47.34]|||||
|Burkina Faso*Day of offer||237.59<br>[28.28]***|||||
|Agricultural savings|||-178.78|406.06|200.44||
||||[214.06]|[470.04]|[473.55]||
|Agricultural savings * male|||||702.91<br>[316.25]**||
|Low commitment savings|||242.74|1,058.83|1,000.70||
||||[315.37]|[372.30]***|[381.84]**||
|Burkina Faso * Low commitment|||||||
|savings||||-2,220.17<br>[376.42]***|-2,148.35<br>[379.89]***||
|Interest|||11.65|||29.39|
||||[9.70]|||[12.08]**|
|Emergency savings* Interest rate||||22.47|23.62||
|||||[13.40]|[13.98]*||
|Ag savings * Interest rate||||1.00|0.48||
|||||[10.00]|[9.72]||
|Sample|T1|T1|T2,T3,T4|T2,T3,T4|T2,T3,T4|T4|
|Observations|201|201|603|603|603|200|
|R-squared|0.25|0.34|0.08|0.16|0.17|0.07|
|Robust standard errors in brackets *|** p<0.01, **|p<0.05, * p<0.1|||||

Secondly, in contrast to the experimental literature that shows a high price elasticity of insurance demand (Cole et al. 2013, Hill et al. 2013, Karlan et al. 2014), we find no demand response to the price. The right 16
<!-- Start of picture text --> Demand for weather insurance<br>c=)<br>o °<br>2 °<br>= °<br>Ze ©<br>a= in o<br>So eeo<br>—TMm2 o<br>om o<br>_<br>°°<br>0 1000 2000 3000<br>TESUTES AEE a<br>© Amountinvested ———— Regression Fit<br><!-- End of picture text --> <!-- Start of picture text --> Demand for savings product<br>= o a<br>3 of<br>a ao<br>a= of<br>zo *<br>—-@ i]Ww a 9<br>23= ey3) o o 8 ° a‘<br>5 rs 2<br>o<br>1000 2000 3000, 4000 5000 6000<br>SEUTGS ANTE<br>o Ag. Investment — Regression Fit<br>4 Emergency — Regression Fit<br><!-- End of picture text -->
gender such as men typically being more exposed to agricultural shocks and women being more exposed to health-, children-related shocks. The questions on perceived exposure to risk in our baseline and midline questionnaires do not appear sophisticated enough to capture this, even though this was a strong result of the qualitative work conducted in the preparatory focus groups.

On average the treatments that were designed to have a higher commitment device (T3 and T4) induced a lower rate of savings. This is despite the positive interest rates offered in these treatments and indicates that high commitment savings carry a cost to participants. However, in Burkina Faso we find that the envelope treatment which was designed to be a low commitment treatment had significantly lower savings, as indicated in Table 5. In discussions with participants after the end of the treatment, it appears that there was a widespread belief that if you elected to take some of the endowment home in the envelope it was very important that it was kept there until one month later so that the money in the envelope was returned, unopened and in full. There seemed to be a belief that the money in the envelope did not truly belong to them. If this was the case, it is understandable that less was invested in this treatment. There is no gender difference in the impact of the high commitment treatment in either country.

Although, on average, the interest rate did not have a significant impact on the amount invested, it did have a significant effect in T4. The amount that participants elected to invest in emergency savings was responsive to the interest rate offered (Figure 3 and column 5 of Table 6). This was true both for the amount invested for one month during the experimental session and for the amount invested at one month until harvest (column 6 of Table 6). This was largely driven by Burkina Faso respondents who had more interest in this type of savings than Senegalese respondents.

In the case of agricultural investment savings, it is surprising to see that the savings is inelastic to the interest rate (col. 3), in contrast to the positive effect of the interest rate on emergency savings. Why are emergency savings more elastic to the interest rate than agricultural investment savings? One interpretation derives from the difference in labeling between the two products. The agricultural investment savings product is strictly labeled for a pre-specified goal which might lead people to invest a target investment amount irrespective of the return they will get from their savings. Indeed the bimodal nature of agricultural savings in Figure 2 (for both high and low commitment instruments) suggests that there may be a target investment amount that people have in mind. On the contrary, the looser type of labeling attached to emergency savings makes the investment target less clear. When making their investment decision, individuals therefore are more sensitive to the return they can get from it. An alternative interpretation relies on the nature of both expenses. By definition, emergency expenses are urgent, and while these savings are highly liquid, the psychological cost of having to immobilize money with the treasurer for emergency spending is higher than for agricultural investment which is bound to occur at a later date anyway. Discount rates are therefore likely higher for emergency spending and increasing faster over time than for agricultural investment. This may also explain why the demand for the emergency savings product is more elastic to the interest rate than the demand for the agricultural investment savings product.

18
Although not shown, correlates of the amount of insurance and savings invested were explored. While risk-aversion is likely to significantly increase take-up of the agricultural investment savings product, its impact is not significant on take-up either of the insurance product or of the other savings products. Interestingly, receiving a higher amount of transfers from migrants over the three-month period preceding the baseline significantly reduces savings in the emergency savings product, both in the initial offer and one month later (columns 4 and 5), indicating that commitment is preferred by those with less buffer liquidity.

Before turning to the question of the impact of the four instruments, we detail what happened with the savings products during the one month between the experimental session and the input fair (for T1 to T4), and during the three months following the fair (for the extended savings product T4+). This helps us understand what might be driving the impact that we analyze in the following subsection.

The majority (96%) of individuals offered one of the two high commitment savings products kept a positive amount of savings with the group treasurer for the whole one-month duration of the experiment. They kept 4485 FCFA on average in their savings in Burkina Faso and 2742 FCFA in Senegal. In Senegal, a significantly higher number of participants withdrew from the envelope before one month (38%) than from the two high commitment savings products (10%) and they withdrew significantly higher amounts from the envelope (3618 CFA on average, 85% of their initial savings) than from the savings products with social commitment (around 2400 CFA, 65% of their savings), indicating that social commitment does help individuals save more for a longer period of time.<sup>3</sup> In contrast, in Burkina Faso, no individuals withdrew money from the envelope during the month it remained at home. This is consistent with the idea noted earlier that in Burkina Faso, participants in T2 did not believe the money in the envelope was truly theirs.

# **5.2. Impact**

In this section, we examine the impact of insurance and savings on outcomes measured one month after the experimental session and after harvest. Specifically we look at investment in farm inputs, agricultural output, savings and measures of food security and consumption. In order to examine the comparative advantages of each financial product, we estimate the intent to treat effect (ITT) by running the following regression: ��� = �� + ���� + ����,��� + ������ + ������� + ��� Eq. (1) where ��� stands for various types of agricultural investment, savings and consumption indicators measured for individual _i_ either at time _t_ , where _t_ is midline or endline. _Ti_ is a vector of treatment assignment dummies and ��,��� is the baseline measure of ��� . In all specifications, a gender and a country dummy is also included as the randomization was stratified by country and gender.

However, we may expect the impact of insurance to vary depending on how much insurance an individual decided to buy. We therefore also estimate the Local Average Treatment Effect (LATE) of insurance and 3 Envelope withdrawal data for Burkina Faso are not available yet.

19
savings by instrumenting the amount of insurance invested by being allocated to the insurance treatment and the day on which insurance was offered. The first stage regression is thus similar to that presented in column (1) of Table 6 (except the sample is expanded to include participants in all treatments). Likewise, we may also expect the impact of savings to vary based on how much an individual decided to save. We instrument for the amount of savings undertaken with the type of savings instrument to which an individual was allocated and the interest rate. The first stage regression is that in column (5) of Table 6.

We start by considering the impact of insurance on investments in agricultural production. No significant difference was observed between the average input use and production behavior of those in the insurance treatment and those in savings treatments (the ITT estimates, not shown to conserve space). However when the amount of insurance purchases is taken into account significant differences between those who purchased insurance and those who did not are observed. Table 7 reports the LATE estimates in which the amount of insurance purchased is instrumented with assignment to insurance and the distance between the offer day and the start of the insurance contract. Insurance increased spending on inputs prior to the fair and on the use of fertilizer both before and after the fair. This is consistent with the findings of Karlan et al. (2014) in Ghana and the findings of Berhane et al. (2014) in Ethiopia, adding further evidence from a different context that insurance can encourage input use. There was no increase in the area of land cultivated (in contrast to Karlan et al. 2014). Spending on inputs during the fair itself was not observed by those who purchased insurance, suggesting that the main increase in spending occurred outside of the input fair. When the baseline values are included also, the same results hold although fertilizer use after the fair is no longer significant.

Higher use of inputs resulted in yield increases for those who purchased more insurance. The measure of yields used is an average of the yields of all crops grown in which yields of each crop are normalized by subtracting the average yield for that crop and dividing by the standard deviation of the yield distribution for that crop.

The higher rates of input use and recorded yields for those that purchased more insurance indicate that the gender differences in take-up of insurance may have a negative impact on agricultural incomes among female farmers if the higher yields cause a high enough return to overcome the cost of increased input use.

It is worth noting that the amount of farm inputs bought at the fair is significantly lower in Senegal than in Burkina Faso. 92% of the sample in Senegal did not buy any input at the fair, compared to 51% in Burkina Faso. Farmers in Senegal were indeed expecting subsidized inputs to be provided by the government soon after the fair, and in the fair products were sold at the market price. However the fair was held just shortly before the final fertilizer application during the season. We find that in Senegal, spending on inputs was higher outside of the fair. Across all treatments, men were found to spend more on agricultural inputs. While men spend significantly (86 percent) more than women on inputs, irrespective of the product they are offered, these differences do not translate into significantly higher agricultural output for men, all other things being equal.

# **Table 7: Impact of insurance (LATE) on agricultural investment**

20
||(1)<br>|(2)<br>After on<br>|(3)<br>e month<br>Other<br>|(4)<br>|(5)<br>|(6)<br>Over whole se<br>|(7)<br>ason|
|---|---|---|---|---|---|---|---|
||Total<br>spending|Spending at<br>input fair|spending<br>on inputs|Fertilizer<br>per acre|Fertilizer<br>per acre|Land<br>cultivated|Yield|
|Insurance|0.0003|0.0003|0.0004|0.0002|0.0002|-0.0001|0.0001|
|amount (FCFA)|[0.0001]**|[0.0002]|[0.0003]|[0.0001]*|[0.0001]*|[0.0002]|[0.0000]*|
|Agricultural|0.1230|0.4313|0.4877|0.2881|0.0444|0.3922|0.1209|
|savings|[0.3051]|[0.2618]*|[0.4343]|[0.1721]*|[0.1861]|[0.8965]|[0.0634]*|
|Low|0.0656|-0.0941|-0.0024|-0.6254|-0.2068|-0.8998|-0.0206|
|commitment||||||||
|savings|[0.4559]|[0.2505]|[0.4225]|[0.2664]**|[0.2445]|[0.7210]|[0.0617]|
||0.5940|0.9633|-0.0668|0.1705|0.7489|-0.2759|-0.0109|
|Low commit*|||||[0.2601]**|||
|Burkina Faso|[0.5417]|[0.5455]*|[0.5311]|[0.2995]|*|[0.9020]|[0.0749]|
|Burkina Faso|-1.1464|3.4903<br>[0.8192]**|-1.7189<br>[0.6392]**|0.9038|0.4904|-0.9853|-0.0291|
||[0.4934]**|*|*|[0.3758]**|[0.3804]|[0.9023]|[0.0670]|
|Male|1.0251|-0.2028|1.6748<br>[0.6044]**|0.8204|0.4798|1.7119|0.0990|
||[0.4104]**|[0.8331]|*|[0.3271]**|[0.3525]|[0.8374]**|[0.0765]|
|Constant|9.6026|0.6325|7.6769|1.4609|3.2106|6.6218|-0.1671|
||[0.4796]**||[0.5316]**|[0.3128]**|[0.3353]**|[0.7969]**||
||*|[0.5999]|*|*|*|*|[0.0650]**|
|Observations|804|804|804|780|781|787|804|
|R-squared|0.0529|0.2187|0.0796|0.0752|0.0448|0.0234|0.0088|

Notes: Robust standard errors in brackets *** p<0.01, ** p<0.05, * p<0.1.

The ITT and LATE estimates for the savings treatments are presented in tables 8, 9 and 10. The regressions in these tables include all that were in the savings treatments, but not those in the insurance treatment. As such they compare the effectiveness of different types of savings treatments to each other. The results indicate that the type of savings products, more than the amount of savings, affected the amount invested in agricultural inputs. Table 8 indicates that those that were in the emergency savings treatment had no different input use than those in the agricultural savings treatments. In Burkina Faso the envelope resulted in considerably higher spending on inputs during the fair and as a result higher input use. We are not quite clear why this treatment resulted in higher levels of spending during the fair. Less was saved in this treatment in Burkina Faso. As discussed above, there seemed to be a perception among participants in this treatment that any money in the envelope was not truly theirs, and behavior was consistent with this belief. If this was the case, then it could be that on the day of the fair when they realized the money in the envelope was indeed theirs it encouraged higher spending in the fair. There was no final impact on yields for those in this treatment.

**Table 8: Impact of Savings (ITT) on Agricultural Investment**

|(1)<br>(2)<br>(3)|(4)|(5)|(6)<br>(7)|
|---|---|---|---|
|After one month|||Over whole season|

21
||Total<br>spending|Spending<br>at input<br>fair|Other<br>spending<br>on inputs|Fertilizer<br>per acre|Fertilizer<br>per acre|Land<br>cultivated|Yield|
|---|---|---|---|---|---|---|---|
|Agricultural|0.04|0.45|0.40|0.03|-0.18|0.20|0.08|
|savings|[0.30]|[0.30]|[0.43]|[0.19]|[0.17]|[0.94]|[0.06]|
|Low Commitment|0.02|-0.08|-0.28|-0.59|-0.11|-0.98|-0.02|
|Savings|[0.50]|[0.25]|[0.44]|[0.26]**|[0.21]|[0.65]|[0.06]|
|Low Commit*|0.49|0.91|0.30|0.24|0.58|-0.13|-0.05|
|Burkina Faso|[0.59]|[0.54]*|[0.63]|[0.33]|[0.27]**|[1.05]|[0.07]|
|Burkina Faso|-1.54|3.46|-2.58|0.57|0.30|-0.31|-0.07|
||[0.50]***|[0.79]***|[0.60]***|[0.31]*|[0.29]|[0.97]|[0.08]|
|Male|0.86|-0.25|1.52|0.51|0.03|1.81|0.14|
||[0.37]**|[0.84]|[0.56]***|[0.28]*|[0.24]|[0.89]**|[0.09]|
|Observations|603|603|603|571|570|581|603|
|R-squared|0.13|0.24|0.14|0.19|0.28|0.11|0.09|

Notes: Robust standard errors in brackets *** p<0.01, ** p<0.05, * p<0.1. The sample is T2, T3 and T4

**Table 9: Impact of Experimental Savings (LATE) on Agricultural Investment**

||(1)|(2)|(3)|(4)|(5)|(6)|(7)|
|---|---|---|---|---|---|---|---|
|||After one<br>|month<br>Other<br>||Ove<br>|r whole seaso<br>|n|
||Total<br>spending|Spending at<br>fair|spending<br>on inputs|Fertilizer<br>per acre|Fertilizer<br>per acre|Land<br>cultivated|Yield|
|Amount saved|0.0001|-0.0015|-0.0013|0.0010|0.0007|0.0001|0.0009|
||[0.0009]|[0.0010]|[0.0010]|[0.0010]|[0.0008]|[0.0002]|[0.0020]|
|Burkina Faso|-1.2669|5.8988|-0.0112|-0.8385|-0.5310|-0.2348|-2.3897|
||[1.6896]|[1.7474]***|[1.7069]|[1.7916]|[1.3335]|[0.3741]|[3.4828]|
|Male|1.0254|-0.3811|1.5394|0.9624|0.4970|0.1427|1.8254|
|||||[0.3910]*|||[1.0597]|
||[0.4217]**|[0.8474]|[0.6462]**|*|[0.4191]|[0.1083]|*|
|Constant|9.4292|5.1962|12.1826|-1.5551|1.2575|-0.5763|3.7750|
||[2.7792]***|[3.2800]|[3.2274]***|[3.1309]|[2.4265]|[0.7056]|[6.2733]|
|Observations|603|603|603|588|587|603|591|
|R-squared|0.0454|-0.1376|-0.0875|-0.5038|-0.2291|-0.1482|0.0019|

Notes: Robust standard errors in brackets *** p<0.01, ** p<0.05, * p<0.1. The sample is T2, T3 and T4 Other control variables included: ag savings, low commitment savings, low commitment X Burkina Faso The results in Table 9 underscore that it was the type of savings instrument rather than the amount saved that had an impact on agricultural investment. In and of itself the amount saved did not have an impact on spending, although it is worth noting that the amount saved varied significantly across the types of 22
savings instruments (as shown in table 6) and this is considered through the inclusion of treatment dummies as controls.

We also present LATE regressions using total savings balance, as opposed to only looking at experimental savings. The total savings variable is the sum of balances in informal and formal savings accounts, ROSCA savings, and experimental savings if applicable. We use amount contributed to the ROSCA in the past 30 days (midline) and the past 3 months (whole season) as a proxy for ROSCA balance. The results are presented in table 10, and present a similar story as in table 9. The coefficients are smaller in size, but similarly all statistically insignificant. This further emphasizes that it was the type of savings treatment, as opposed to total savings balance, that affects agricultural investment.

**Table 10: Impact of Total Savings (LATE) on Agricultural Investment**

||(1)|(2)|(3)|(4)|(5)|(6)|(7)|
|---|---|---|---|---|---|---|---|
|||After on|e month<br>Other||Ov|er whole season||
||Total<br>spending|Spending at<br>fair|spending on<br>inputs|Fertilizer<br>per acre|Fertilizer per<br>acre|Land<br>cultivated|Yield|
|Total savings|0.0000|-0.0000|0.0000|0.0000|0.0000|0.0001|-0.0000|
||[0.0000]|[0.0000]|[0.0000]|[0.0000]|[0.0000]|[0.0001]|[0.0000]|
|Burkina Faso|-1.7156|4.1041|-3.0533|-0.0157|0.0452|-2.4343|0.1058|
||[0.8267]**|[0.8664]***|[0.9889]***|[0.7114]|[0.5635]|[1.6519]|[0.1217]|
|Male|0.6745|0.1063|1.1672|0.3521|0.0815|0.6106|0.2305|
||[0.5542]|[0.9400]|[0.7416]|[0.4534]|[0.4356]|[1.2674]|[0.1118]**|
|Constant|9.6516|0.6669|7.9395|1.5363|3.3000|6.5275|-0.1626|
||[0.5393]***|[0.5994]|[0.5924]***|[0.4248]***|[0.3625]***|[1.2121]***|[0.0851]*|
|Observations|603|603|603|588|587|591|603|
|R-squared|-0.1423|0.0855|-0.1536|-0.9410|-0.5835|-0.3855|-0.7570|

Notes: Robust standard errors in brackets *** p<0.01, ** p<0.05, * p<0.1. The sample is T2, T3 and T4 Other control variables included: ag savings, low commitment savings, low commitment X Burkina Faso We also examine whether the treatments had additional impacts on household welfare, outside of encouraging investments in agriculture. We examine whether non-experimental savings behavior is significantly different across treatments. This may be the case if increased savings in the experiment crowds out savings in other instruments. Very little difference across products is observed. Results are not shown to conserve space. Those in the low commitment savings treatment in Burkina Faso invested more in ROSCAs than those in other treatments, perhaps suggesting that the lower amount of saving in the envelope was compensated for by increased saving in other forms. However after harvest, when the savings products are no longer available, this effect disappears. There were no other significant differences.

Tables 11 and 12 present regression results for a variety of welfare measures in the month after the experiment and at the end line. Self-reported food security is assessed in columns (1) and (3). The number 23
of days on which luxury food items—meat, fish, rice and onions—were consumed in the week prior to the survey are reported in columns (2) and (4). Onions were a key commodity that we asked about because they are a non-essential food item largely purchased on the market during the lean season if they can be afforded. Information on how well individuals managed shocks that occurred was collected during the end line survey after harvest and these measures are examined in columns (4) and (6).

Those offered the savings consumed less well one month after the experiments than those in the insurance treatment (table 11, column 2). The difference could in part be driven by the fact that investments in insurance were lower than investments in savings which resulted in individuals in the insurance treatment taking home more unrestricted cash than individuals in other treatments. Indeed, this difference is no longer present after harvest (column 4). Individuals offered the insurance product were better able to manage shocks that had occurred (column 6), 4 percentage points more than the control group. This is consistent with the finding that these individuals produced more on average and had more savings.

**Table 11: Impact of insurance (ITT) on consumption and managing shocks**

||(1)<br>After o|(2)<br>ne month|(3)|(4)<br>Af|(5)<br>ter harvest|(6)|
|---|---|---|---|---|---|---|
||Degree of<br>food<br>insecurity|Ate meat,<br>fish, rice or<br>onions|Degree of<br>food<br>insecurity|Ate meat,<br>fish, rice or<br>onions|Days before<br>buying<br>medicine|Used household<br>liquidity to manage<br>shock|
|Insurance|0.07|1.66|-0.12|-0.11|-0.01|0.04|
||[0.09]|[0.67]**|[0.18]|[0.72]|[0.24]|[0.02]*|
|Burkina Faso|0.36|-6.68|0.17|-12.85|-1.42|0.05|
||[0.16]**|[0.89]***|[0.25]|[0.98]***|[0.20]***|[0.02]**|
|Male|-0.38|0.57|-0.28|0.68|-0.46|-0.01|
||[0.12]***|[0.78]|[0.24]|[0.95]|[0.23]*|[0.02]|
|Observations|804|796|804|791|804|794|
|R-squared|0.17|0.19|0.21|0.31|0.04|0.02|

Notes: Robust standard errors in brackets *** p<0.01, ** p<0.05, * p<0.1.

**Table 12: Impact of savings (ITT) on consumption and managing shocks**

||(1)<br>After on|(2)<br>e month|(3)|(4)<br>Af|(5)<br>ter harvest|(6)|
|---|---|---|---|---|---|---|
||Degree of<br>food<br>insecurity|Ate meat,<br>fish, rice or<br>onions|Degree of<br>food<br>insecurity|Ate meat,<br>fish, rice or<br>onions|Days before<br>buying<br>medicine|Used household<br>liquidity to<br>manage shock|
|Agricultural savings|-0.16|-1.25|-0.32|-0.59|0.13|0.00|
||[0.12]|[0.52]**|[0.21]|[0.82]|[0.26]|[0.02]|
|Low commitment|0.17|0.74|-0.01|-0.24|0.48|-0.03|
|savings|[0.10]|[0.51]|[0.25]|[0.67]|[0.69]|[0.02]|
|Low commit*|-0.05|1.27|0.05|0.97|-0.41|0.02|
|Burkina Faso|[0.20]|[1.11]|[0.36]|[1.59]|[0.68]|[0.03]|
|Burkina Faso|0.40|-7.58|0.08|-12.76|-1.34|0.04|
||[0.19]**|[0.91]***|[0.33]|[1.08]***|[0.26]***|[0.02]*|

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|Male|-0.35|0.35|-0.24|0.48|-0.26|-0.01|
|---|---|---|---|---|---|---|
||[0.14]**|[0.91]|[0.27]|[1.03]|[0.28]|[0.02]|
|Observations|603|597|603|593|603|597|
|R-squared|0.16|0.21|0.19|0.28|0.04|0.02|

Notes: Robust standard errors in brackets *** p<0.01, ** p<0.05, * p<0.1. The sample is T2, T3 and T4

# 6. **<u>Summary and conclusion</u>**

Individuals in developing countries, and especially in Sub-Saharan Africa, have limited access to financial products that help mitigate the numerous risks they face. There is a fast growing literature showing the high demand for and significant impact of health, weather and crop insurance (Cole et al. (2013), Karlan et al. (2014), Dercon et al. (2014), Thornton et al. (2012), Delavallade (2014)) as well as of savings products (Dupas and Robinson (2013)). However, and while this is a pressing policy question, literature is still scant as to which of these financial products might be the most efficient at favoring risky investment, fostering agricultural production and improving welfare. This paper addresses this question in the context of a field experiment conducted simultaneously in rural areas of Senegal and Burkina Faso between June and August 2013. 800 participants were randomly offered one among four financial products – weather index insurance, low-commitment agricultural investment savings, high-commitment agricultural investment savings and high-commitment emergency savings.

Insurance was found to have the most consistent impact on input use and purchase. As a result, yields were higher for those who bought more insurance. There is some evidence that as a result individuals who were offered insurance were better able to manage risk.

Significant gender differences in take-up were found. Women invest significantly less in the insurance product. Given the impact of purchasing insurance on agricultural investment, yields and wellbeing, our results suggest that this lower take-up of agricultural insurance disadvantages women. The reason hypothesized for this lower take-up among women is the fact that women face higher levels of risk that are uninsured by a rainfall product and that directly impact the yield they realize (as well as other outcomes)—for example risks of childbirth as a result of very high fertility rates or risks of lost income and production as a result of caring for sick children. In an environment in which theses costs are uninsured, and these costs fall primarily on women, a rainfall insurance product carries less value for women than for men. Further work is needed to understand whether this is indeed the main factor behind the gender difference in demand and if it is, to understand how financial products can be better designed to meet the different risk needs of women.

Our findings are consistent with previous studies showing individuals’ preference for savings products offering liquidity in the presence of labeling (Dupas and Robinson, 2013).

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