Participation in Micro Life Insurance and the Use of Other Financial Services in Ghana


  • The financial support for the research underlying this article was provided by the Poverty Reduction, Equity and Growth Network (PEGNet). The authors wish to acknowledge the helpful comments from two anonymous referees, Toman Omar Mahmoud, Jann Lay, Andreas Landmann, Krisztina Kis-Katos, several colleagues at the German Institute for Economic Research and the University of Göttingen, and the participants of the following conferences: the ISS Doctoral Workshop of the 6th Development Dialogue; the 2008 PEGNet Annual Conference in Accra, Ghana; the Conference on Social Protection for the Poor and Poorest in Africa 2008 in Entebbe, Uganda; and the 5th International Microinsurance Conference in Dakar, Senegal.


This article investigates households’ decisions to take up micro life insurance and to use other financial services. It estimates a multivariate probit model based on Ghanaian household survey data. The results suggest a mutually reinforcing relationship between the use of insurance and the use of other formal financial services. Risk-averse households and households who consider themselves more exposed to risk than others are found to be less likely to participate in insurance. This suggests that insurance is considered to be risky. There is indicative evidence for adverse selection and a life-cycle effect in the uptake of insurance.