MR Microinsurance_2012_03_29.indd - International Labour ...

Microinsurance that works for women
shock is not due to receive her payout (WWB, 2006d). Other informal reciprocal
social relationships are also unable to provide full cover for many risks. In the
earlier example from Nepal, contributions from community members were
found to cover only 25 per cent of the costs associated with the death of a family
member (Simkhada et al., 2000). Social relationships may also provide little protection
from covariant risks, such as natural disasters or health epidemics,
because others may be facing similar problems, limiting their ability to help.
Adverse secondary implications
Several risk strategies, while sometimes effective in the short term, can lead to
enduring adverse secondary implications, perpetuating a cycle of poverty for
poor women and their households. Allocating business profits to savings instead
of investment, for example, is one of the main reasons for women’s businesses
failing to grow to the same extent as men’s businesses (Murray, 2008). Accumulating
precautionary savings can also limit expenditure on other vital needs such
as housing or education. Other risk-averse business practices, such as diversification
into a number of smaller businesses, may reduce the impact of any one business
failing, yet limit each business’s chance of succeeding. These risk-averse
choices cause poor women to forgo some profitable opportunities that might
have helped them break the cycle of poverty (Dercon and Kirchberger, 2008).
When a woman copes with shocks by selling productive assets such as livestock
or equipment, she may be forced to accept a below-market price out of desperation.
Regardless, she wipes out her ability to earn income from the assets in
the future. Similarly, pulling children out of school may reduce immediate
household costs and free up children’s time to work, but it causes a serious loss to
children’s development and severely curtails their long-term earning potential.
Reducing food intake and medical expenses similarly can have a serious health
impact on the household. Research from the recent economic crisis indicates that
women and girls suffer disproportionately from these cutbacks (Institute of
Development Studies, 2009).
Borrowing may help to smooth financial needs in the short term, but may
lead to long-term indebtedness (Simkhada et al., 2000). Defaulting on existing
loans may free up short-term cash, but may result in a future loss of access to
finance. Figure 16.2 illustrates how many of the aforementioned risk strategies
can fail the woman who employs them (Dercon and Kirchberger, 2008).
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