Can Micro Health Insurance Improve the Economic Status of the Microcredit Members?

Presenter: Syed Abdul Hamid, University of Dhaka

Abstract

Background: Micro Health Insurance (MHI) was added to microcredit programs in Bangladesh in the late 1990s by some microfinance institutions (MFIs). The aim was to protect the microcredit clients from health risks to prevent their economic downfall. Under the MHI scheme, the MFIs provide preventive and curative healthcare including health promotion services. To date there is little evidence on whether MHI improves the economic status of the microcredit members.

Concept: A MHI scheme offering both curative and preventive healthcare and health promotion services may increase the health status of the participating households via increased health awareness, improved health practices, and increased utilization of formal healthcare. Improved health status may lead to higher productivity, higher labor supply, low level of workdays lost, and a lower level of healthcare expenditure. The first two can be regarded as ‘augmenting’ effects and the latter two as ‘stabilization’ effects.
In addition, the supplementation of MHI to microcredit may reduce the uncertainty of healthcare expenditure and thus raise investment in all forms of capital. This may happen because if the household is insured against health risk, it may invest in high return riskier assets because the insured household does not need to retain cash or to hold easily liquidable assets for precautionary purposes.
Thus, these two channels (improvement of health status and reduction of uncertainty regarding healthcare expenditure) may lead to household income above subsistence level.
Aim: This research examines the added impact of MHI on the economic status of microcredit members in rural areas of Bangladesh.

Data and Method: The research is based on primary data collected from three areas of Grameen Bank: (1) where MHI has been operated for at least five years, (2) where MHI has been placed recently, (3) where MHI has not yet been placed, but may be placed soon. Two villages were randomly selected from each area and then two microcredit centres were randomly selected from each village. Finally, all the current female microcredit members of the selected loan centres were surveyed using a set of semi-structured questionnaires. A total of 244 female microentrepreneurs were interviewed. We also conducted some focus group discussions and in-depth-interviews on a sub-sample of the quantitative survey.

We focused on the following outcomes: household income, stabilization of household income, investment in productive assets and poverty status. Appropriate econometric methods were used to estimate the determinants of the outcomes using a broad set of conditioning variables and focusing on the role of MHI.

Findings: The results show that MHI has a positive impact on household income, stabilization of household income, increased investment in productive assets and reduction of poverty. However, the evidence is not robust for any of the outcomes. The qualitative analysis also provides similar evidence.

Conclusion: This study provides an indication that MHI can improve the economic status of the microcredit members. As this research has used a non-representative sample of the insured population and static data to analyse dynamic outcomes, separate research studies are needed to deal with the issue similar to us on a representative sample preferably through at least a repeated cross section design to draw more concrete conclusions.