Report 14th International Microinsurance Conference 2018
13
Academic pre-conference workshop: How financial diaries can complement survey data effectively
Hosted by CEAR
By Laura Montenbruck In conjunction with the 14th International Microinsurance Conference, the Center for the Economic Analysis of Risk (CEAR) organised an academic pre-conference workshop. The aim of this seminar was to show how financial diaries add important information to administrative and classical survey data and thus help us to better understand the financial decisions and risk management strategies of the poor. In this context, three different research projects were presented. Cash constraints and intertemporal choice The “Financial & Health Diaries1” project combined yearlong weekly interviews on respondents’ finances and health status to investigate the interplay between cash constraints, enrolment in health insurance, health shocks and financial lives amongst Health Insurance Fund target populations in rural Nigeria and Kenya. For the Kenyan sample of 120 dairy farmers, the project explores the effect of cash constraints and health shocks on the decision where to sell milk: to a dairy cooperative, paying farmers higher prices for their milk, but deferring these payments until the middle of the next month; or to milk vendors at local markets, who pay immediately but offer lower prices. The researchers find that dairy farmers earn an increased share of their dairy income from the local market in weeks that follow a period of lower income from milk production and other income-generating activities, and in weeks with uninsured health shocks. Thus, farmers earn relatively more income from the local market when cash-constrained. Farmers not only
sell a greater quantity of milk at the local markets, they also receive a higher price for their milk at these local markets when they need cash, suggesting that informal milk vendors help farmers manage their financial needs. Health shocks do not affect dairy sales to the cooperative amongst farmers with health insurance, suggesting that cooperatives could provide insurance to stabilise the supply of milk delivered to the cooperative. Financial diaries had an essential role in generating these results. They allowed identification of different patterns depending on week of the month and season, consistent with the hypothesis that farmers use the local market to manage their cash flows when they are in need of cash. They also recorded a lot more of the variation in cash in hand than surveys could potentially record and, providing high-frequency panel data, the diaries allow controlling for confounding time-invariant characteristics.
Box 2 “Portfolios of the Poor: How the World’s Poor Live on $2 a Day2“ tackles the fundamental question of how the poor make ends meet. It leverages findings of financial diaries studies in Kenya, India, Mexico, South Africa, Tanzania, Mozambique and Pakistan. The groundbreaking work can link an understanding of household financial management to the business case for services that help address some of the most significant challenges that lowincome families face.
Portfolios of the poor Portfolios of the Poor (see Box 2) summarises a number of projects that use financial diaries to provide a deeper understanding of the actual challenges of the poor, their preferences and their decision processes. Whereas researchers often jump to conclusions from simply interpreting survey data, the diaries are used to have a closer look at underlying patterns.
11 — Daryl Collins (right), CEO, Bankable Frontier Associates, United States, keynote speaker of the academic pre-conference session. 12 — Glenn Harrison, C.V. Starr Chair of Risk Management & Insurance, Robinson College of Business, Georgia State University, United States
11 1 The Diaries project was conducted by the Amsterdam Institute for International Development with funding from the PharmAccess Foundation 2 Authored by Collins, D., Morduch, J., Rutherford, S., & Ruthven, O., the book was published in 2009.
12
