MR Microinsurance_2012_03_29.indd - International Labour ...

338 Insurance and the low-income market
– Selling assets: Another strategy for coping with risk involves selling assets, such
as gold, land and housing, or income-generating assets, such as business equipment
or livestock.
– Starting or increasing income-generating activities: Members of poor households
may also take up or increase income-generating activities to earn extra
money to cope with financial shocks (Ezemenari et al., 2002). Frequently it is a
severe financial shock that pushes women, and in some cases their children, into
the labour force. A recent study of women sex workers in western Kenya disturbingly
reveals that they are nearly 20 per cent more likely to supply riskier, betterpaid
sex on days when a family member, particularly a child, falls sick as a way to
cope with health-related expenses (Robinson and Yeh, 2009).
– Participating in informal reciprocal social relationships: Informal social relationships
can also help poor families cope with financial shocks. In Kenya,
women use harambees (which translates to “pool together”), where women come
together to cover the cost of financial shocks, such as a death in the family.
Similarly, a study in Nepal found that when someone dies, community members
typically donate small amounts of money and food, which families use during
the 13-day mourning period (Simkhada et al., 2000).
16.2.3 Consequences of risk strategies
Though many risk strategies that poor households use provide some protection,
even together they are often inadequate to fully cover the costs associated with
financial shocks (Dercon and Kirchberger, 2008; Cohen and Sebstad, 2009).
Moreover, these strategies often have adverse secondary implications for women
and their families.
Inadequacies
While WWB research suggests that poor women are keen to save and can save
around 10 to 15 per cent of their net monthly income, the amount is rarely
enough to cover more than basic emergencies and some health-related costs. Savings
can also be ineffective when the security of those savings is in question, as is
often the case with informal savings where the threat of theft, fraud or pressure
from other family members to spend counteracts their ability to serve as an effective
coping mechanism. Research in Uganda found that 22 per cent of savings are
lost in informal savings schemes compared to a loss rate of just 3.5 per cent in the
formal sector (Wright and Mutesasira, 2001). Since women are more likely to use
informal savings mechanisms, this risk affects them disproportionately (WWB,
2003).
Furthermore, saving through ROSCAs can be unhelpful when a number of
members require money at the same time or when a member facing a financial