@article{Shee:276005,
      recid = {276005},
      author = {Shee, A. and Turvey, C. and You, L.},
      title = {Design and Rating of Risk-Contingent Credit for Balancing  Business and Financial Risks for Kenyan Farmers},
      address = {2018-07},
      number = {2058-2018-5313},
      pages = {37},
      year = {2018},
      abstract = {Weather related agricultural risks and limited access to  credit are serious impediments to agricultural productivity  and growth in developing countries. This paper describes a  novel insurance linked credit model piloted in Kenya, where  insurance markets are effectively absent and farmers do not  borrow because of the risk of losing their collateral. One  of the challenges in deigning bundled credit products, in  the absence of traded securities, is the actuarial pricing  and risk rating of the insurance and the loan product. We  develop a rainfall linked risk-contingent credit that  transfers drought risk related perils from borrower to  lender via insurance mechanism that provide a balance  between business and credit risks for smallholder farmers.  We describe the methodology used to design and rating of a  risk-contingent structured operating agricultural credit  instrument using CHIRPS rainfall data from 1981-2016 in  Kenya. We illustrate the use of Monte Carlo methods to risk  modelling that can be integrated within general insurance  and credit rating framework. The innovative design and  methodology presented in this paper are as important as the  product delivery mechanism and will be of interest to  specialists in development economics and agricultural  finance.},
      url = {http://ageconsearch.umn.edu/record/276005},
      doi = {https://doi.org/10.22004/ag.econ.276005},
}