Liquid milk: Savings, insurance and side-selling in cooperatives

Xin Geng, Wendy Janssens, Berber Kramer*

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

Limited access to reliable financial instruments makes it difficult for rural households to manage daily cash flows. Selling goods through cooperatives can improve savings, but cooperative income is not easily accessible when facing an emergency. Cash-constrained households may therefore side-sell in local markets that pay on the spot, while insurance could reduce the need to side-sell. We test these hypotheses using panel data for farmers from two Kenyan dairy cooperatives. Both cooperatives pay only once a month, with local market vendors paying a lower price but upon delivery. We find that farmers sell less milk to the cooperatives when facing uninsured health emergencies or when cash on hand is low. Health insurance reduces side-selling. These findings highlight that selling, saving and risk-coping decisions are intertwined, with side-selling providing a strategy to manage temporary cash constraints. This suggests that linking agricultural and insurance contracts can enhance cooperatives’ financial sustainability.

Original languageEnglish
Article number103142
Pages (from-to)1-20
Number of pages20
JournalJournal of Development Economics
Volume165
DOIs
Publication statusPublished - Oct 2023

Bibliographical note

Funding Information:
We thank the PharmAccess Foundation and Health Insurance Fund for funding the Health and Financial Diaries project and Synovate Kenya for collecting the diaries data. We are grateful for suggestions made by Mark Dean, Glenn Harrison, Anja Sautmann, Charles Sprenger, and participants in numerous seminars and conferences. This work was undertaken as part of the CGIAR Research Programs on Policies, Institutions and Markets (PIM) and Agriculture for Nutrition and Health (A4NH), led by IFPRI; IFPRI's Strategic Innovation Fund; and NWO Veni (Dutch Research Council, grant no. 451-10-002).

Publisher Copyright:
© 2023 The Author(s)

Funding

We thank the PharmAccess Foundation and Health Insurance Fund for funding the Health and Financial Diaries project and Synovate Kenya for collecting the diaries data. We are grateful for suggestions made by Mark Dean, Glenn Harrison, Anja Sautmann, Charles Sprenger, and participants in numerous seminars and conferences. This work was undertaken as part of the CGIAR Research Programs on Policies, Institutions and Markets (PIM) and Agriculture for Nutrition and Health (A4NH), led by IFPRI; IFPRI's Strategic Innovation Fund; and NWO Veni (Dutch Research Council, grant no. 451-10-002).

Keywords

  • Cash constraints
  • Cooperatives
  • Financial diaries
  • Insurance
  • Kenya
  • Semiparametric estimation

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