Where and how index insurance can boost the adoption of improved agricultural technologies

Remote sensing and other advances have led to an outpouring of programs that offer index insurance to small scale farmers with the expectation that this insurance will enable adoption of improved technologies and boost living standards. Despite these expectations, the evidence to date on the uptake and impacts of insurance is mixed. This paper steps back and considers theoretically where index insurance might be most effective, and whether it should be offered as a standalone contract, or explicitly interlinked with credit contracts. Emerging from this analysis is a set of nuanced recommendations based on the structure of risk and the property rights (collateral) environment.