Discussion Papers 2023

CIRJE-F-1219	"Shocks and Brave Farmers: Evidence from a Randomized Agricultural Microfinance Experiment in Bangladesh"
Author Name	Hossain, Md Amzad, Mohammad Abdul Malek, and Yasuyuki Sawada
Date	August 2023
Full Paper	PDF file
Remarks

Abstract
In developing countries, insurance products against various climate and non-climaterelated shocks targeting farmers are still largely unavailable. We implement a largescale randomized experiment of a customized microcredit program for small farmers in Bangladesh to explore the role of credit as an insurance mechanism. We show that the program enhanced the resilience of tenant farmers to adverse shocks by facilitating greater credit utilization. This enabled farmers to be more independent in crop-farming activities, encouraged technology adoption, and increased income from crop-farming activities. These results highlight the effectiveness of expanding credit as a tool for institutions to support households susceptible to shocks.
Keywords: Agricultural micro-credit, idiosyncratic and covariate shocks, insurance

Abstract

In developing countries, insurance products against various climate and non-climaterelated shocks targeting farmers are still largely unavailable. We implement a largescale randomized experiment of a customized microcredit program for small farmers in Bangladesh to explore the role of credit as an insurance mechanism. We show that the program enhanced the resilience of tenant farmers to adverse shocks by facilitating greater credit utilization. This enabled farmers to be more independent in crop-farming activities, encouraged technology adoption, and increased income from crop-farming activities. These results highlight the effectiveness of expanding credit as a tool for institutions to support households susceptible to shocks.

Keywords: Agricultural micro-credit, idiosyncratic and covariate shocks, insurance