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Why microinsurance is important for the world’s poorest

8/8/2017

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Post by Olivia Zed

​Insurance, generally speaking, is a means of protection against risk, or the unexpected hiccups that life throws our way. Despite its critical importance, it is something we don’t often think about aside from when we need it. This protective shield affords us a level of certainty in the face of struggle and adversity, which unfortunately is something that most of the world lacks.
  
This sense of certainty, not the insurance itself, is what’s most taken for granted among the insured. In less developed communities, individuals’ certainty about their food and water supply, crop yield, and overall livelihood can be fleeting. A wide range of factors contribute to these uncertain conditions, but its significance lies in the effect that it has on individuals in the developing world and the role it plays in perpetuating the cycle of poverty. The cost of uncertainty grows for the world’s poorest, because without insurance and/or the necessary social safety nets, they are more prone to keeping with the familiar, even when doing so is inefficient.
 
In the context of development, Zua focuses on rural farmers in Zambia. When low-income farmers are uninsured, they are less likely to adopt new practices and more reluctant to change, even if that change presents potential for growth. To put this conundrum in perspective, imagine how or why someone without medical insurance may avoid risks to not jeopardize their health. In a similar vein, rural farmers do not want to jeopardize their crop yields. A key difference, however, is that the farmers Zua works with live in extreme poverty, and their livelihoods are dependent on the stability that accompanies the familiar. This means that even a small risk, such as investing in a new technology to increase agricultural productivity, becomes greatly exacerbated. 

Through providing this sense of certainty, microinsurance can be an incredibly powerful tool for development. By mitigating agricultural risks, such as droughts and flooding, and facilitating access to a wide range of financial services, Zua empowers farmers to increase their productivity and ultimately break free from the cycle of poverty. 
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