Determinants of Micro-Insurance Demand in Jimma Zone

Aregu Asmare, Abel Worku


Vulnerability to risk is a constant factor in the lives of the poor and a cause of persistent poverty. Micro insurance offers one approach to mitigate risk, yet demand is relatively low in developing countries. Low demand is a complex issue and many factors influence a household’s decision to buy micro insurance. Thus, the aim of study was investigating determinants of micro insurance demand in Jimma Zone. The data used in this study was cross sectional data which collected from households using structured questioner and in-depth interview with officials of insurance companies and microfinance institutions that provides micro insurance product. The collected data was analyzed using multinomial logistic regression model. The findings of the study show that household size, employment status, level of education, adequacy of micro insurance supply, delivery channel, premium, monthly income, Insurable asset, financial literacy, trust and risk aversion has significant impact on the demand for micro insurance products, whereas age, gender, adverse selection and moral hazard, religion and peer influence has insignificant impact on household’s demand for micro insurance products. 

Full Text:



Akotey O J Kofi, A Osei, Albert G 2011,’The demand for micro insurance in Ghana’,

Amit, K 2010, ‘Micro insurance-risk protection for 4 billion people’, Swiss Reinsurance Company Ltd. Economic research and consulting

Araya 2011, ‘Weather Insurance for Farmers: Experience from Ethiopia’- Paper presented at the IFAD Conference on New Directions for Smallholder Agriculture 24-25

Beck, T., & Webb, I. (2003). Economic, Demographic, and Institutional Determinants of Life Insurance Consumption. The World Bank Economic Review, 17(1), 51-88.

Bendig, M, & Arun, T 2011, ‘Enrolment in Micro Life and Health Inusrance’, Evidences from Sri Lanka. Bonn: IZA DP No. 5427.

Bendig, M., Giesbert, L. & Steiner, S. (2010): Savings, Credit and Insurance: Household Demand for Formal Financial Services in Rural Ghana, GIGA Working Paper Series, No. 94, January 2010, Hamburg: German Institute of Global and Area Studies.

Cai, J., and Song, C. (2011) „Insurance take up in rural China: Learning from hypothetical experience?, Mimeo.

Chankova, S., Sulzbach, S. & Diop, F. (2008): Impact of mutual health organizations: evidence from West Africa, Health Policy and Planning, 23(4): 264-276.

Christiana B., (2016) Determinants of the demand for micro-insurance in Ghana unpublished master’s thesis.

Clarke, D & Kalani, G 2011, ‘Microinsurance Decisions’: Evidence from Ethiopia. Mimeo, University of Oxford, 1-43.

Cole, S., Giné, X., Tobacman, J., Topalova, P. B., Townsend, R. M., and Vickery, J. I. (2013) ‘Barriers to household risk management: evidence from India’, American Economic Journal: Applied Economics 5(1): 104–135.

Dercon, S., Gunning, J.W. and Zeitlin, A. (2011). The demand for insurance under limited credibility: Evidence from Kenya. International Development.

Dror, D.M., Radermacher, R. & Koren, R. (2007): Willingness to Pay for Health Insurance Among Rural and Poor Persons: Field Evidence from Seven Micro Health Insurance Units in India, Health Policy, Vol. 82, No. 1.

Eling, M., Pradhan S., & Schmit J., (2013), The Determinants of Micro Insurance Demand. Working Papers on Finance No. 2013/8.

Feldstein, M. (1973). The welfare loss of excess health insurance. Journal of Political Economics, 81: 251–280

Giesbert, L., Steiner, S., & Bendig, M. (2011). Participation in Micro Life Insurance and the Use of Other Financial Services in Ghana. The Journal of Risk and Insurance, 78, 7-35.

Giné X., Townsend, R., and Vickery, J. (2008) ‘Patterns of rainfall insurance participation in rural India’, World Bank Economic Review 22(3): 539–566.

Huber, F. (2012). Determinants of Microinsurance Demand: Evidence from a Micro Life Scheme in Indonesia. Finance Master's thesis: Department of Finance Aalto University School of Economics.

Ito, Seiro and Hisaki Kono (2010): Why is the Take-up of Microinsurance so Low? Evidence from a Health Insurance Scheme in India, The Developing Economies 48 (1), pp. 74-101.

Jowett, M. (2003) ‘Do informal risk sharing networks crowd out public voluntary health insurance? Evidence from Vietnam’, Applied Economics 35(10): 1153–1161.

Kakar, P and Shukla, R 2010, ‘The Determinants of Demand for Life Insurance in an Emerging EconomyIndia Margin’ The Journal of Applied Economic Research

Kouame, E B H Komenan Aka, Narcisse 2012, ‘Risk preferences and demand for insurance under price uncertainty’ an experimental approach for cocoa farmers in côte d’ivoire

Leazerman S Lisa J C Gillings, Kenan, F Jeanna, H 2010, ‘ Innovations and barriers in health micro insurance’ ILO’s Micro insurance Innovation Facility..

McCord M J Gaby, R Elizabeth, M 2005, ‘Micro insurance Demand & Market Prospects Lao People’s Democratic Republic’mimeo, 1-34.

Micro Insurance Network (2016) The Landscape of Micro insurance in Africa, published by Micro insurance network, Munic re foundation and micro insurance center.

Morduch, J. (2006), "Microinsurance: the next revolution?" In Understanding Poverty (A. Banerjee, R. Benabou, and D. Mookherjee, eds.), Oxford University Press, New York, NY.

Morsink and Geurts 2011, ‘The trusted neighbor effect: Local experience and demand for micro insurance’

Mossin, J 1968, ‘Aspects of Rational Insurance Purchasing’ Journal of Political Economy. Vol. 76, 533-568.

Ndurukia 2017 the determinants of demand for micro insurance services in Kenya American Journal of Finance ISSN 2520-0445 (Online) Vol.2, Issue 6 No.3, pp 79 - 107, 2017

Norton M Daniel, O Malgosia, M Eric, H 2010, ‘Evidence of Demand for Index Insurance’ Experimental Games and Commercial Transactions in Ethiopia of Finance, 63(6), 2557-2600.

Pratt, J.W. (1964). Risk Aversion in the Small and in the Large. Econometrical: Journal of the Econometric Society, 32(1): 122-136.

Roth, J Michael, J McCord, and Dominic, Liber 2007, ‘The Landscape of Microinsurance in the World’s 100 Poorest Countries.’ Appleton, WI. The MicroInsurance Centre, LLC..Journal of Risk Finance, Vol. 12 Iss: 3 pp. 182 - 194

Saqware, A. N. (2012). Micro Insurance in Tanzania: Demand Perspectives. A Thesis Submitted in the Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy at the University of Central Lancashire. pp. 1-224.

Schlesinger, H. and Doherty, N.A. (1985). Incomplete Markets for Insurance: An Overview. The Journal of Risk and Insurance, 52(3): 402-423.

Shifa, M 2012, ‘The Landscape Of Micro-Insurance In Ethiopia: Exploring Opportunities And Challenges’, NBE National bank of Ethiopia 2012, Birritu bulletin; volume number, 112

Smith & Chamberlain 2010, ‘Opportunities & challenges of micro insurance in Ethiopia’ A report Commissioned by the International Labor Organization and United Nations Capital Development Fund. January. Oxfam America: Boston, MA.

Tadesse and Brans 2012, ‘Risk, coping mechanisms, and factors in the demand for micro-insurance in Ethiopia’ Journal of Economics and International Finance Vol. 4(4), pp. 79–91, 22

Thornton, R. L., Hatt, L. E., Field, E. M., Islam, M., Sol´ Diaz, F., and Gonzalez, M. A. (2010) ‘Social security health insurance for the informal sector in Nicaragua: A randomized evaluation’, Health Economics 19(S1): 181–206.

International Research Journal of Business Studies indexed in: