New ways for rural finance? Livestock insurance schemes in Vietnam

Topic :

In developing countries, insurance markets are usually underdeveloped. Nevertheless, if the development path is supported by strong structures and institutions, anonymous markets will over time replace informal insurance net-works as they are more efficient. In Vietnam, livestock is an important household income source and has additional non-economic functions in the households. Rural financial institutions in Vietnam financed for a long time only a small array of agricultural investments, but frequently including livestock purchase. The absence of off-farm investment possibilities further encouraged investment into livestock production. Livestock death is, therefore, considered to be a main factor contributing to poverty.

Farmers using credit to purchase livestock face two risks at once: (1) losing the livestock due to disease and subsequently (2) failure of the investment. Farmers would like to reduce the uncertainty. Nevertheless, a formal agricultural insurance market hardly exists in Vietnam and farm households have to rely mainly on informal mutual aid schemes.

The objective of this paper is to contribute to the discussion on the general feasibility of a livestock insurance scheme (LIS) in Vietnam. In this context the supply of LIS is discussed. Qualitative data collection took place mainly between 2003 and 2004. Four different types of insurance providers were selected for analyzing the supply side:

  1. Insurance tied to credit within a state owned company,
  2. Insurance tied to credit within a development project,
  3. A state owned insurance company,
  4. A private insurance company.

By selection of these different insurance providers the variety of livestock insurances offered in Vietnam was covered. The main conclusion is that there is no insurer in Vietnam offering an area-wide, sustainable animal insurance scheme. Offering sustainable livestock insurance is mostly hampered by unreliable data on livestock mortality and by politically low set premiums.

  • Resource type
  • Author Dufhues, T.; Lemke, U.; Fischer, I.
  • Organisation
  • Year of Publication2004
  • Region
  • LanguageEnglish
  • Number of pages10 pp.
  • EditionResearch in Development Economics and Policy Discussion Paper

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